![\"\"](\"https:\/\/www.mathewbinkley.org\/wp-content\/uploads\/2012\/05\/tennessee-real-per-capita-income.png\" "\\"tennessee-real-per-capita-income\\"")
<\/a>In normal times, it typically takes a country 4-5 years to fully recover in the aftermath of financial crises.\u00a0 However, those crises\u00a0occurred against the background of an otherwise healthy world economy, and were usually cured by wage deflation stimulating increased exports to healthier countries.<\/p>\nThe current crisis\u00a0hearkens\u00a0back to the Great Depression, in that most of the world’s major economic powers are experiencing a simultaneous slowdown, and thus there is little hope of an export-led recovery (unless Little Green Men show up on our doorsteps wanting to trade).\u00a0 And there are more negative economic signs than positive<\/a> on the horizon.\u00a0 Given that, full recovery is likely to take a further 5-10 years.<\/p>\n The chart below highlights the essential differences between a normal economy and one experiencing a “balance sheet recession”, which is a polite academic term for a depression.<\/p>\n While that is usually true, a depression is the\u00a0exception that proves the rule. Because people are now underwater due to the housing collapse, they have switched from\u00a0consuming to saving.\u00a0 Now that savers outnumber consumers,\u00a0consumers have pricing power when it comes to borrowing, and that has pushed interest rates on savings accounts and CD’s near 0% (and in the case of US bonds, *below 0%* in real terms<\/a>), hurting savers.\u00a0 For their part, consumers increased savings rate sets off a vicious cycle<\/a> which causes the economy to shrink.<\/p>\n It has similarly affected business investment. Companies are now\u00a0avoiding profitable investments that require long horizons to pay off in\u00a0favor of short-term debt minimization.\u00a0 From their perspective, why invest in a new factory or new machinery when consumers aren’t in any position to increase their spending?\u00a0 Paying off debt is much less profitable, but also much less risky.<\/p>\n That simultaneous drop in both\u00a0personal consumption and business investment has generated distressing levels of unemployment.<\/p>\n The “natural” rate of unemployment (absent the economic crisis) is roughly 5.5%. Today after three and a half years of recovery, unemployment still stands at 7.9%. Arithmetic says:<\/p>\n 6.4 million Tennesseans x (7.9% – 5.5%) If it were a city, it would be the 5th largest in the state, ahead of\u00a0Clarksville (136,231). \u00a0And that does not include people who are working part-time but want to work full-time, or people who have given up looking altogether. \u00a0 So the 154k Tennesseans is only a lower limit on the size of the unemployment problem.<\/p>\n Even if you still have a job, the tough economic outlook combined with abundance of unemployed has hit incomes hard, especially for blue-collar workers.\u00a0 It’s hard to negotiate for a pay raise when there’s 5 unemployed people who would happily do your job for less.<\/p>\n Economics can be a constant source of irritation to politicians, because\u00a0while it always gives the answer you need<\/em> to hear, it rarely gives the answer you want<\/em> to hear<\/a>.\u00a0 Unfortunately, when it comes to solving problems of this scale, the intersection of what’s economically desirable and what’s politically possible can be achingly small.<\/p>\n The public always wants\u00a0political decisions to be pain-free and in their favor.\u00a0 On the other hand, politicians often take a short-term ideological view, and advocate “solutions” that cause further long-term harm because it helps them today and they will be out of office before the butcher’s bill comes due.\u00a0 And the state’s year-to-year balance-budget requirement, while normally a wise constraint on legislative ambitions, in current circumstances prevents the state from taking steps that are in the public’s long-term best interest.<\/p>\n With all that said, what steps do you believe the state can take (via tax structure, expenditures, infrastructure investment, training, economic development, etc.) to stimulate the state economy, help put people back to work and put us on a sustainable path to growth?<\/p>\n","protected":false},"excerpt":{"rendered":" Reducing unemployment, growing incomes, and getting things back to normal are at the top on everyone’s wish list nowadays.\u00a0 Both Tennessean’s real income and employment crashed in 2008, and have yet to recover to their former levels. In normal times, … Continue reading <\/a>In normal times, the desire to consume exceeds the desire to save.\u00a0Supply-and-demand allows savers to charge consumers (via the interest rate) to borrow their money. For their part, consumers do their best\u00a0to keep all those dollars circulating through the economy, creating a virtuous cycle that causes the economy to grow.<\/p>\n<\/a><\/p>\n
\n= 154,000 Tennesseans unemployed by the crisis<\/p>\n