The Meltdown

Inflation outpaced wages in June and consumer spending plummeted. Inflation, in fact, rose at its highest one-month level since 1981. That's going to go down somewhat in Juy, because gas prices have decreased. But we're still looking at stagnant wages, increasing unemployment, and no end in sight to the housing crisis. The economy is in the shitter.

Paul Krugman looks at this today.

The good news, I guess, is that we’ve been experiencing a sort of slow-motion meltdown, lacking in dramatic Black Fridays and such. The gradual way the crisis has unfolded has led to an angels-on-the-head-of-a-pin debate among economists about whether what we’re suffering really deserves to be called a recession.

Yet even a slo-mo crisis can do a lot of damage if it goes on for a year and counting.

Home prices are down about 16 percent over the past year, and show no sign of stabilizing. The pain from this bust is widely spread: there are millions of American families who didn’t buy mortgage-backed securities and haven’t lost their houses, but have nonetheless been impoverished by the destruction of much or all of their home equity.

Meanwhile, the job market has deteriorated even more than you’d guess from the jump in the headline unemployment rate. The broadest measure of unemployment, which takes into account the rapidly rising number of workers forced to take cuts in paid hours and wages, has risen from 8.3 percent to 10.3 percent over the past year, roughly matching its high point five years ago.

And there’s no end to the pain in sight.

While economists debate statistical analyses, people out in the country are hurting. In particular I worry about the underemployed, those part-time workers who can't string enough jobs together to survive. They're not traditionally counted in the employment statistics, and yet they're as much of a problem as the "underinsured" are in the health care crisis.

Krugman thinks another stimulus package may be in order, along the lines of what Barack Obama has proposed. But clearly, the sputtering economy has to become more of a focus of the campaign.

Incidentally, it’s surprising that the lousy economy hasn’t yet had more impact on the campaign. Mr. McCain essentially proposes continuing the policies of a president whose approval rating on economics is only 20 percent. So why isn’t Mr. Obama further ahead in the polls?

One answer may be that Mr. Obama, perhaps inhibited by his desire to transcend partisanship (and avoid praising the last Democratic president?), has been surprisingly diffident about attacking the Bush economic record. An illustration: if you go to the official Obama Web site and click on the economic issues page, what you see first isn’t a call for change — what you see is a long quote from the candidate extolling the wonders of the free market, which could just as easily have come from a speech by President Bush.

Obama actually stepped in the right direction on this today. He needs to realize he's in a fight instead of hovering above on some plane of post-partisanship.