Are You There, Washington? It's Me, the Shrinking Economy

Thu, 01/31/2013

By Scott N. Paul

Originally published at Huffington Post, Jan. 31, 2013...

There was an unfortunate bit of news lost in the headlines yesterday morning: For the first time since the second quarter of 2009, the economy has shrunk.

That's right: It shrunk. Shriveled. Those are ugly words, but they pack a little more punch than the sanitized term, contraction.

But let's use it anyway: In the last quarter of 2012, the size of our economy actually contracted by 0.1 percent, according to numbers released by the Commerce Department. While a tenth of a percent doesn't sound like much to the headline writers of the world, this is nothing to shrug at. The economy grew at 3.1 percent in 2012's third quarter. That makes for a substantial drop-off in activity at the end of the year. It means a lot of transactions lost; a lot of contracts unsigned; a lot of economic activity that never took place.

So what happened?

This didn't come out of the blue, of course. Late in the year, Superstorm Sandy and its after-effects severely slowed economic activity in the New York-Metropolitan area. Plus, austerity seems to be the name of the game when it comes to government spending. And a slower-than-expected shopping season can put a dent in the way we total our GDP.

But there's one crucial factor in the GDP equation that no one is talking about: jobs. Our unemployment rate stands at 7.8 percent.

We spent plenty of time talking about jobs in the run-up to the November elections -- so much so that jobs were the topic of more political advertisements than any other issue during the campaign cycle. The presidential contest alone featured more than 975,000 spots on the subject.

But now our focus has shifted. There are plenty of worthy debates to be had on immigration reform, gun control, and our national debt. But we need to keep our priorities straight. If Washington's chattering class spent a sliver of the time talking about smart ways to create jobs as it spends obsessing over the debt, we might actually put some Americans back to work and put a dent in that deficit total.

In the early aught years, we hollowed out our middle class by sending manufacturing jobs overseas for the promise of slightly lower prices on retailers' shelves. In fact, we lost roughly 5.5 million of them between 2000 and 2009. And when our housing and financial bubbles burst in 2008, the drastically reduced incomes of millions of Americans moving into retail and service sector jobs were enough to keep us out of an outright depression, but not the longest economic downturn in decades.

In 2013, millions of once-middle income families continue to struggle. So the least we can do is acknowledge that a tenth of a percentage point of a contraction isn't just a blip. That contraction isn't just a hiccup for the millions of unemployed and underemployed Americans out there. It's another sign that Washington needs to get serious about fixing our economy the right way.

We need a national strategy, so that we will know where we're going and what will come next.  We need tax reform that encourages businesses not to offshore their labor but to create jobs at home; we need an infrastructure plan of more substance than the one passed by the last Congress; we need to dedicate more federal education dollars for technical and vocational skills programs so that our employers aren't faced with a workforce skills gap; we need to actually enforce the rules that govern our international trade agreements. And we hope -- we need -- President Obama to lay the framework for such a strategy during his State of the Union address.

Simply put: We need a recovery that puts some muscle back into our middle class. But unless we follow an active policy strategy designed to encourage that, we're not going to get it. So while our economic recovery putters along and Washington yawns, the question must be asked: Is this the kind of recovery that we want?

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