Here's Why It Looked Like We Had A Recovery, And Why That's Now Crumbling

Buiding Collapse

The U.S. recovery is starting to slip, but in order to find out how to fix that, people need to understand why the recovery was unsustainable in the first place.

Sherle R. Schwenninger and Samuel Sherraden of The New America Foundation has put together a presentation explaining what this U.S. recovery was built on, and why this strategy has ceased to work.

Their conclusion is that the U.S. needs a new, more aggressive, fiscal stimulus that targets job creation. They don’t believe monetary policy, specifically quantitative easing 2, is likely to help without fiscal policy also being in place.

Even if you disagree with their conclusions, it’s actually a great explanation of the headwinds the economy currently faces.

First, here's what the recovery was built on: Rebuilding inventory

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Businesses investing

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Government stimulus

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Government backing the consumer

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Tax breaks for consumer spending

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

But, all these factors are collapsing: Inventory rebuild over

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Businesses just aren't investing

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

The government is no longer providing stimulus

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

States now have their own fiscal crisis

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Government no longer supporting the consumer

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

And the support provided earlier is having a negative impact now

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Households are paying down debt, rather than taking on new loans

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

And people are saving, which means they aren't spending

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

This can be seen in the massive credit contraction

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

The housing situation is still a mess

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

And people haven't recovered the wealth they lost in the recession

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Unemployment remains high

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

And wages aren't recovering

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Trade deficit is continuing to widen, which means exports aren't growing

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

More deflationary pressures

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Businesses are uncertain about the future

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

And the outlook is, therefore, much worse

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

Here's why policy needs to change

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

A new fiscal stimulus is needed

Source: Sherle R. Schwenninger and Samuel Sherraden, New America Foundation

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