Brian Wesbury and Bob Stein give us reasons to feel good about the economy:
1) Between 1965 and 1982, the US economy was in recession one out of every three years, inflation hit double digits and the unemployment rate peaked at 10.8%. Since 1982, the US has been in recession just one out of 16 years, the unemployment rate bottomed at 3.8% in early 2000 and then at 4.4% in early 2007. In other words, a wobbly economy today feels much worse to the average American and politician than it did 30 years ago.
2) What’s important to recognize is that even at the bottom of the current recession, sometime in mid-2009, the living standards of the typical American will still be amazingly high. In fact, even an aggressive contraction in real GDP will leave per-capita real GDP above 2005 levels.
3) Now, we did not have 8% unemployment back in 2005, but that kind of jobless rate is not unusual for recessions. The unemployment rate peaked at only 6.3% in the recession early this decade but peaked at 7.8%, 10.8%, 7.8%, and 9.0% in each of the previous four recessions, respectively, dating all the way back to the 1973-75 recession.
4) Even the original manifestation of the economic problem – the massive overbuying and overbuilding of residential real estate – will eventually generate benefits once the economy starts to recover. Think about the young worker or family just starting out in 2005. Now think about a similar worker in 2010. The future worker/family will pay less for housing, and not because they get “teaser” interest rates on loans for houses they end up unable to afford. In addition, these very same investors have a chance to buy equities at extremely attractive valuations.
5) Most importantly, for the long run, we still live in a country blessed with a Constitution that limits the power of would-be tyrants and a culture that attracts and encourages entrepreneurs like no other place on earth.