If the recession is over, why am I depressed?

Economists say a recession ends when the economy begins to turn upward.

Many people believe a recession ends when the economy returns to where it was before its decline.

By both measures, the recession is over.

So why do many of us feel that it continues?

Not only is the rate of recovery uncomfortably slow, but the post-recession economy is markedly different from the boom times of just a few years ago.

Many people have found lower level jobs paying less than they had earned previously.  Other people have simply left the labor force, giving a somewhat false impression about the true scope of unemployment.

Christine Lagarde, the chief of the International Monetary Fund, recently said that recovery had produced the “new mediocre.”  By that, she meant that growth and employment may have returned to previous levels, but they have fallen short of the kind of activity needed to provide a sense of prosperity.

In her view, without government action and leaving hope for a stronger recovery entirely to the private sector, the world could not produce real improvement.

She called for more steps in tax policy to promote growth.  She wants to see serious efforts to control tax evasion, greater government efficiency to reduce costs and a cut in payroll taxes.

Lagarde said tax breaks for energy producers should be ended, because they “mostly benefit the relatively affluent, not the poor.  They also harm the environment.”  The money saved could be used for other purposes without a tax increase.

More people should be brought into the labor force, increasing jobs and creating customers.  In the U.S., that could mean finally agreeing on an immigration policy.  In other countries, more women should be allowed to work.

Yet another area deserving attention is the repair of roads, bridges, airports and other basic elements of the economic structure of countries, she said.  This would not be wild public spending.  By simply devoting public funds to essential measures, the economy would benefit both now and in the future.

None of this is rocket science, but our current political stalemate is likely to cause it to be ignored.

Tax policy won’t change so long as influential political leaders worry that any change will mean that somebody’s taxes will increase.  Even worse, those who get tax breaks have enough money to pour into the political process to block change.

Immigration policy reform will be delayed so long as uneasiness with new ethnic groups stands in the way of including those who will perform the jobs nobody else wants to do and become consumers whose purchases will push the need for new jobs.

And government won’t have resources to spend on research leading to new technologies and new jobs.  Instead, “the new mediocre” economy is likely to grow slowly as government and business try to make outmoded methods work.

Maine, with its diversified economy of small businesses, usually misses both economic booms and busts.  But it is not immune from change, which calls for innovative policy, not a struggle to keep the past alive.

The recent announcement of the closing of the Verso mill in Bucksport, the Great Northern bankruptcy, and the devaluation of Madison Paper and Sappi Somerset facilities are signs of significant change in the paper sector, once the largest single element of the state’s economy.

Gov. LePage’s effort to find a new buyer for the Bucksport mill may miss the point that the world needs less paper.  Mike Michaud, a former paper worker, has correctly said the state cannot go back to the paper industry as it once was.  Eliot Cutler proposes the state buy the mill’s power plant and sell lower cost electricity for economic development.

The role of government needs to be reexamined.  Federal and state government must be serious about the trade-offs to be made between regulation and growth.  Too often, each new rule or economic development measure is adopted without understanding its full effects.

For a candidate to say the most important issue is “jobs, jobs, jobs” is not enough.  What kind of jobs do we need and what sacrifices would we make to get them?

And it’s also time to recognize government’s role in the economy as the biggest single customer, the provider of the social safety net, and the entity responsible for building roads and bridges.  It is overly simplistic to oppose government spending on the grounds that government has grown too big. 

The recession seems to have imposed the “new mediocre” on us.  To avoid that fate may require new leadership.

Congress avoids declaring war on ISIS

Is the U.S. at war with ISIS?  Is its military action in the Middle East legal?

The answers to those questions could affect the 2014 elections.

The U.S. Constitution clearly states that Congress has the power to declare war, while the president is the Commander in Chief of the armed forces.  It does not say that the president can commit those armed forces to war without the approval of Congress.

Today, American warplanes are engaged in attacking the personnel and facilities of ISIS and other terrorist groups in Iraq and Syria.  U.S. boots are on the ground, worn by military “advisors.”

Leaders of both parties in Congress have made sure that neither the Republican-controlled House of Representatives nor the Democratic-controlled Senate will vote to authorize or ban American military action in the Middle East.

Whatever members of Congress may think of the deployment of American forces – and many approve of it or want even more involvement – they don’t want to vote on it, at least not until after the elections.

Billions of dollars are being spent pursuing the fight against ISIS.  Eventually, Congress will have to come up with the money and deal with the effect of that spending on efforts to cut the deficit.  But it won’t touch the question with elections looming.

By keeping the conflict in the Middle East out of the elections, they believe they can avoid the risk associated with introducing such a potentially volatile issue into the campaigns.  Neither side knows the way the voters would decide, and the debate could draw attention away from pet issues of the day.

So the president and Congress both dance around the use of the term “war.”  Politicians have performed verbal acrobatics to avoid calling “war” the aerial attacks on ISIS and the deployment of U.S. troops in Iraq.

The Constitution does not define “war.”  One authoritative dictionary calls it “open and declared armed hostile conflict.”  That seems to fit.

In fighting today’s terrorists, President Obama has declared that the American objective is to defeat and eliminate ISIS by the use of American attack aircraft.  He seeks to legitimize this action, partly by creating a coalition of nations sharing the same objectives and willing to play a supporting role.

To justify attacking ISIS, Obama has cited a questionable law allowing the use of U.S. forces against Al Qaeda, the group that staged the 9/11 attacks, and its allies.  But he has also said that law should be repealed, because it is so vague that it could be misused.

This situation raises two basic questions about the state of the American political system.

First, isn’t this supposed to be a democratic republic in which the will of the people, expressed through their elected representatives, rules?

According to public opinion polls, which seem to have become a substitute for elections, popular opinion is divided on the extent of American military involvement in Iraq and Syria.  So Washington leaders simply avoid consulting the voters on what may be the most important question of the day.

No wonder that half the eligible voters fail to show up to vote on Election Day.  The politicians may do whatever they want without seeking the will of the voters.  Why bother voting, when you are being so obviously manipulated and not respected as the ultimate source of political power?

Has the American system evolved into a form of paternalism under which the president and Congress know what’s best for the rest of us and no longer believe it is necessary to ask?

Second, should elected officials act as our leaders or is it acceptable for them to survive elections by avoiding issues?

If the American people are uncertain about the proper course of action in the Middle East, perhaps because of a lack of good information, our leaders could lay out the facts and options and then advocate what they believe to be the best course of action.

Leadership means taking risks; the voters may not agree with the policy favored by a member of Congress.  Candidates should explain the facts and make the case for what’s best for the country.  Avoiding the issue entirely is not leadership, just risk avoidance.

Where does your congressional candidate stand?

The ISIS conflict surely looks like war.  In case of doubt about a conflict, it should be considered to be war, subject to congressional approval and funding.   

Before American lives are committed to the risk of death in combat, members of Congress should accept the risk of defeat in elections.

Ads, polls and images decide elections

Political campaigns are now well underway, and television is flooded with political ads.

The outcome of this year’s elections will be a judgment on the strongly conservative politics of the Tea Party and its friends, but it looks like there will be no landslide either way, only a shift at the margins.

A few elections or a relatively few votes in many elections will determine the broader result of this year’s balloting.

For voters still considering their choices, a number of factors are at play that can influence the outcome.  And, unfortunately for some candidates, these factors may have little to do with the issues and proposals.

Recently published research suggests that many voters make up their minds based on their initial impression of the candidate’s personality.  If they like the person, they may be inclined to give no further thought to the elections and simply vote for the candidate.

For incumbents, those initial impressions are long past, but the voters tend to stick with their previous voting behavior.  Most incumbents win.

First impressions can be created by the candidate’s television spots.  Even if you do not watch the news, you will it find it almost impossible to avoid commercials pushing politicians and causes.

That allows the candidate to project the image that he or she favors.

Watching the Maine candidates for governor, I come way seeing independent Eliot Cutler seeking to show his breadth of experience and knowledge, Democrat Mike Michaud stressing his proven ability to work across the aisle, and incumbent Republican Paul LePage emphasizing his business-like approach to governing.

If any of these messages resonates with me, my mind could be easily made up.  I would not have to look at their record or even if they are telling the truth.

Of course, media spots are not limited to candidates’ positive messages.  Negative ads, attacking the opposition, are frowned upon though they are a part of American political history.  Plus, they work.

And candidates are always looking for a “gotcha” moment, when a negative revelation may be enough to change perceptions and sink their opponent.  Sometimes the truth has to be stretched to make “gotcha” work, but there are almost always a partisan ready to try.

Recently, a Maine GOP spokesman tried to tie Michaud to a posting by an independent supporter in which an off-color reference, unknown to most voters, was made.  The effort failed and could end up helping Michaud.

Raising “gotcha” issues is an attempt to create a single, election-changing event.  Underdogs hope that something will happen between now and Election Day that will change voters’ perceptions of a leading candidate. 

That can happen, and sometimes it’s a gaffe or the emergence of a hidden problem from the candidate’s past.  Such errors or revelations can cause voters to take a second look at a race on which they had already made up their minds.

Then, there’s polling.  Almost every day, there are reports of new polling results, meant not only to inform, but to create bandwagon effects or to stimulate more effort.

We tend to treat polling information as fact rather than as one indicator among many.  The recent Scottish independent vote was forecast by several polls to be a squeaker, but it wasn’t.  Union with the UK won by 10 percent.

We gloss over the so-called “margin of error.” or the fact that one time in 20, the poll will be off the mark.  In close races, the marginal difference in results can virtually make the survey valueless.  Still, thanks to the polls, we allow ourselves to be influenced by the way we believe a campaign is going.

Elections can be influenced by campaigns that either round off the facts excessively or downright lie.  If campaigns fling false information back and forth, people decide either based on perceptions and prejudices or, out of disgust, simply don’t vote.

But the situation is not hopeless.

The media must go beyond reporting what each side says in providing objective and complete coverage.  Online news, newspapers, television and radio should ferret out and reveal the truth, risking some candidates claiming bias.

Of course, such reporting has to be based on real research and the facts, not packaging unsupported opinion as if it were news.

The real solution is up to voters, who have to work at understanding candidates and issues.  Votes do matter, but only if voters take the trouble to dig into elections.

It’s dangerous to our system of government if people spend more time on fantasy football than on real elections.

Good economic news is often really bad

Are things getting better?  That’s difficult to know, because good news often turns out to be bad news.

Here’s an example.  Personal savings have increased.

Recent reports indicate that consumer spending has declined, but savings are up.  In other words, people are saving more and spending less.

What’s wrong with that?  The American economy is driven mostly by consumer spending, which accounts for about two-thirds of all activity.  When people save, they buy less of everything from food to vacations.  Fewer new jobs are created.

Saving money is also essential.  Most people have put too little away to support themselves in retirement.  They may be forced to rely on Social Security, but that program may itself come up short when many of today’s workers are ready to retire.

Savings can boost the economy by providing funds for loans to businesses and homebuyers, but they don’t produce the immediate lift to the economy that spending does.

The increased savings rate may be an important sign about changes in the American economy caused by the Great Recession.  If the economy can collapse suddenly, people may realize they need nest eggs, just in case they lose their jobs. 

Protecting oneself against such setbacks is a valuable lesson that had largely been ignored in favor of promoting spending.  But worrying about the future may undermine short-term recovery.

Second example: the Federal Reserve has been helping recovery from the recession.

While the Fed cannot increase government spending or alter taxes, it can boost the economy by reducing the cost of borrowing.

The Fed lowers interest rates to make it easier to borrow for a new home or to expand a business.  When these moves take place, they create new jobs.

Congress has refused to approve any additional government spending for job creation, because, without a tax increase, it would make the federal deficit even larger.  Cutting back on the size of government means recovery is left to the private sector and the Fed.

It has cut interest rates to historically low levels.  And its policy has been successful in stimulating borrowing.

For investors, including most pension programs, by lowering interest rates, the Fed has driven them to the stock market.  To boost their income, they turn from lending to investing in corporate stock.  When many buyers chase stocks, their prices increase.

That’s just what has happened, and the stock market has hit record highs. But then a strange switch takes place.

If there’s good economic news, which everybody wants, investors guess the Fed will allow interest rates to increase.  The conventional wisdom is that investors will start lending to business and cut back on stock purchases, leading to a decline in stock prices.

These days, just the hint of good economic news has the odd effect of causing the stock market to fall.  Without the Fed increasing interest rates, the net result of good news can be a loss of gains for pension plans and other investors. 

Good economic news, which should cause stock prices to climb, is bad news, pushing those prices down.

There have been good times when both increased interest rates and a rising stock market have been possible.  But that’s not today’s conventional wisdom.

Third example: cutting taxes.

Another switch from good to bad occurs when taxes are reduced.  Of course, just about everybody wants to pay less tax, so tax cuts should be good news.

Unless governments resort to more borrowing, which amounts simply to putting off payment and paying interest as the price of the delay, tax cuts force them to reduce spending and reject new demands on the public treasury.

Here’s one recent example.  The sudden emergence of the ISIS terrorists has posed a dangerous threat the U.S. cannot ignore. 

But taking military action against ISIS is already running up federal spending, and the effort will require billions of dollars.  Some of the same members of Congress who steadfastly oppose government spending and demand tax cuts also seek strong U.S. military action against ISIS.

Holding the line on taxes can lead either to more borrowing and government debt or to cuts in programs like Medicare and Medicaid to find the funds necessary to combat new terrorist organizations.  Either way, the good news of tax cuts can quickly turn into the bad news of more debt or more cutbacks.

The problem seems to be that we want to see only one side of major issues.  The world has become more complicated and making choices between good and bad is a lot more difficult.

U.S. Intelligence failed to warn about ISIS

The emergence of ISIS, a brutal terrorist group, has forced the U.S. to gear up for a new phase in the war on terror. 

It has led the formation of a new coalition to combat ISIS (also called ISIL or the Islamic State). The struggle against this powerful group may take years, well after President Obama leaves office.

Fatigued by wars in Iraq and Afghanistan, Americans have been reluctant to send troops to the Middle East.  Instead, the U.S. deploys aerial attacks, hoping to destroy ISIS together with action by local ground troops.

Though the U.S. has inflicted damage on ISIS, the forces on the ground have been poorly equipped and, at the outset, were unable to hold off the terrorists as they advanced to the outskirts of Baghdad.

The international coalition has been assembled in hopes of turning the tide and ultimately to wipe out a terrorist group that threatens countries far removed from the Middle East.

After struggling to come up with a plan to counter the terrorists, Obama says the U.S. will use increased force and the new coalition to eliminate ISIS.

The sudden appearance of ISIS and the protracted effort to come up with a response to it raise questions going beyond the efforts to organize an effective response.

One question is how U.S. intelligence apparently completely missed the rapid growth of a terrorist organization having sound finances, modern arms, and a large fighting force including American and British citizens.

The massive American intelligence complex was unable to warn Obama and military leaders about the new threat in the Middle East. Such a warning might have given them the time to snuff it out earlier.   

This was not a few terrorists in a cave. This was a big, new organization that was missed or ignored.

The failure to spot ISIS was not the first such mistake.  Intelligence officials, possibly influenced by Bush era political leaders, thought American troops would have flowers spread at their feet when they entered Iraq to topple Saddam Hussein.

They failed to understand that Saddam and his Sunni minority had dominated the majority Shia population in Iraq.  The new American sponsored government controlled by the Shia retaliated and excluded the Sunnis, rather than creating a broad government that could promote national unity.

That left the Sunnis as ripe recruitment targets for ISIS.  Only when this fact became evident did the U.S. take steps to induce the Iraqi government to deal more fairly with Sunnis, a process not yet completed.

In short, the American intelligence miscalculation at the time of the Iraq invasion contributed to the situation allowing ISIS to gain support.

The need for a new effort to deal over a period of years with the ISIS threat comes as a surprise.  Apparently, the end of American involvement in Afghanistan and Iraq was considered by some to be the end of “the war on terror.”

Even without a clear military victory, the end of a ground war fought by American troops meant that the ongoing struggle would be managed by using intelligence services to help countries in danger to protect themselves.  But war did not end, and intelligence did not produce good information.

Terrorism is likely to be a continuing threat to nations.  New terrorist groups should face an international community prepared to deal with it, not an American president forced to develop a new response and recruit a coalition of volunteers.

The United Nations was created to try to prevent countries from going to war against one another.  It was expected to deal with threats involving countries, so-called “state actors.”

Terrorists were not considered to be a major international problem.  They are “non-state actors” and have replaced, though not completely, wars between countries as the biggest threat to peace.

ISIS, the terrorist organization that is a “non-state actor,” wants to end up being a new country carved out of Iraq and Syria.

The U.N. could be updated to make it the main forum for states to spotlight terrorists, whose success presumably is not in the interest of any country.  At least, the U.N. might reveal if any countries were backing the terrorists.

By using the U.N. to identify terrorist threats, the U.S. and others could find it easier to form coalitions willing to fight terrorism.

Al Qaeda and ISIS should have taught the world to be better prepared for dealing with terrorism.  The U.S. and other countries must accept that the war on terror may never end and remain ready to defend against it.