Whatever the causes of the recession, addressing those causes alone will not end it. We are currently seeing an acceleration of job losses, which is the path to depression. An economy can absorb a certain level of unemployment without serious problems. Above that point, higher unemployment becomes a self-perpetuating condition as shrinking incomes reduce spending, resulting in still more unemployment. Jobs will be lost in service sectors, small businesses will shut down.
Foreclosures will increase, but now among those who had traditional mortgages, who had till now been making payments without difficulty. Cars will be repossessed. Spending in all sectors will decrease–including the retail food sector. Restaurants will close. Those still with jobs, of course the majority, will curtail spending out of fear. The travel sector will experience declines.
At this time it is essential to preserve however many jobs that can be preserved. That’s the primary reason for bailing out the automakers. While it’s true that there are currently very few customers for new cars, improvement must be anticipated as people are put back to work.
President-elect Barack Obama has made it clear his top priority will be job creation. He sees the threat of spiraling unemployment. That the current administration refuses to address this concern makes one suspect that Republicans may wish to allow conditions to worsen even more, leaving the new president with an almost hopeless depression even before he takes office.
Liberal Buzz 