Be Calm and Prosper
CHICAGO -- Maybe it was the imminent passage of the stimulus bill, but 30,000 feet over Ohio last Friday afternoon, as President Obama was heading to Chicago for a long weekend, "catastrophe" suddenly seemed too strong a word.
Or maybe the president was just trying to keep hope alive when he noted that things have been worse than now. In fact, nearly everyone's grandparents have had it worse than we do. Americans are tough, resilient, inventive -- and we will survive.
He said it, not I.
Obama's reflections on America's economic past were part of a wide-ranging discussion with five columnists the president invited along for the flight. He was responding in part to a question about the potential looming "catastrophe" -- a word he invoked as recently as the previous Monday night's news conference -- if the stimulus package and other hoped-for measures aren't put in place, and fast.
"What does catastrophe look like?" I asked.
With characteristic calm, Obama described what happened in Japan in the 1990s, when core problems in the banking system were papered over (his words). Should we follow that path, he said, we might never "fully get private credit flowing again, and the economy contracts severely and then sort of limps along for a very long period of time."
Obama pointed out that a key difference between then and now is that Japan had extensive foreign currency reserves -- and the United States was pulling the world economy along. Now all economies, including China's, are "decelerating at a fairly rapid rate."
"So, if what happened in Japan is duplicated here in the United States, there's nobody else to help drive the engine of growth, you could end up seeing an even more protracted and prolonged worldwide contraction. And I think that would have a severe impact on our quality of life."
What that means, specifically, no one seems willing to say -- for good reason. One of the greatest challenges for the president since taking office has been to convince the American people that their situation is serious while not scaring them into economic paralysis.
Thus, he steered the conversation away from catastrophe toward a reflection on history familiar to baby boomers, who grew up hearing their parents' holes-in-our-shoes, miles-in-the-snow stories about the Great Depression. Things are not as bad now as they were in the 1930s or even the early '80s when, Obama reminded us, he was still in college. Young people -- by which he did not seem to mean the columnists aboard -- are simply unfamiliar with hardship, he said.
"So for a huge number of people out there, they're just not accustomed to seeing a bad economy with really high unemployment and very bearish markets. . . . What we're going through now is nothing compared to what our grandparents went through during the Great Depression."
The truth is that what Obama's grandparents went through was nothing compared to what their grandparents went through, which may not be such good news. Historian Scott Reynolds Nelson, writing last October in the Chronicle of Higher Education, noted the economic parallels between now and the really bad depression known as the Panic of 1873.