Obama Spending Plans Clouded Due to Sharp Downturns

A sense of detachment was very evident between the forecasts made by the White House and American life’s every day grim reality last Friday. During this day, it was said that the Commerce Department had given their own harsh assessment regarding the last three remaining months of the year 2008. Instead of making an initial estimate of the fact that the economic contraction had been at an annualized rate of around three point eight percent (which in itself is already a very abysmal figure), the government instead decided to peg that decline to six point two percent. This figure officially makes it the worst quarter in the history of America since the year 1982.

Looking to the Past

The American economy can trace its alarming growth of fortune by looking back – as well as the swift pace of its current decline. This rollercoaster turn of events have resulted in economists looking for ways and means to describe where the country is headed and if it will reach the point of depression just like in the 1940s. Then again, a lot of economists are careful when it comes to making comparisons of today’s recession to the 1930s period of the Great Depression. Back then, the unemployment rate had been at twenty five percent. The conditions at the moment can be said to be not as poor as that of the twin recessions back in the 1980s – where unemployment was pegged at ten percent. However, a lot of experts will indeed confirm that such a downturn will undoubtedly make the turn from bad to worse.

A Case of Semantics?

Instead, economists are now using such a term like ‘depression’ to depict a picture of an extreme economic distress which will be around far longer than any sort of downturn – even though the term is quite subjective and has no particular academic definition or contextualization. Of course, such is more than just mere semantics. The government is currently trying to figure out how to go about its spending plans as they prepare for another infusion of money for more troubled banks. At the same time, they are trying to contemplate on making additional bailouts for the automotive industry because they seem to be next in terms of economic peril. However, the extent of such needs will also depend greatly on the estimated costs of these worldwide economic damages. As the chief economist of the company Moody’s Economy.com, Mark Zandi can put the chances of the country experiencing a mild depression when unemployment reaches twenty five percent (up from fifteen percent a mere three months ago). If such is the case, then the unemployment rate will end up reaching ten point five percent towards the end of the year 2011.