Out of Control Policy Blog

Double-Dip Recession Talk

Earlier this week I appeared on RT to discuss all the talk of a coming double-dip recession (video below). As I've said on this blog a number of times, there certainly is a chance for a double-dip, or "W-shaped" recession. And a growing chance at that. Pretty much every economic indicator is point south, which means a continued, long road ahead for recovery.

Some examples are slumping retail sales, lethargic unemployment numbers, and a limping housing market that has more foreclosure problems ahead, a deeply problematic shadow inventory problem, and is being fully supported by the government as it is. There are also significant problems in the global credit markets, as lending is tightening, and capital investments are still virtually nonexistent.

In 2011, when many see the double-dip as a growing possibility the economy faces a host of issues: first, the end of the Bush tax cuts will pull money away from consumers (yes, the high income brackets consume in the economy too) and investment (with the capital gains hike). The end of stimulus spending will be good for the macro economy because there will be less government crowding out of the private sector, but on the local level, where government money has been propping up the economy, people will have to face the pain they should have felt back in 2009. Commercial real estate will be a problem for banks. Housing woes will continue to plague balance sheets. And with limited credit in the economy now, there won't be much economic growth from investments.

Whether or not this sends the economy into a technical double-dip is almost unimportant. There isn't much difference between a -1% recession and 1% growth. They will both suck. Simple as that.


Anthony Randazzo is Director of Economic Research


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