The economic news from Europe isn't good, and for the first time an unthinkable outcome -- the dismantling of the eurozone -- seems to be inevitable. Without knowing what the future holds, an economic downturn doesn't have to incite exaggerated fear and panic. Since 9/11, there have been several causes for anxiety, and yet with 75 percent of the public telling pollsters that America is headed in the wrong direction, the widespread gloom is an overreaction.
To stave off a repeat of the panic surrounding the collapse of the housing bubble, emotions and reason must come together. Each of us must attend to this on our own. The media latches on to dire predictions and shocking events because they make good headlines. The right wing, without actually longing for a downturn in order to defeat Obama, has fomented fear for political gain, so we can't turn to the two parties to lead public awareness. They are preoccupied with divisive battles in an election year.
Reason must come first, since emotions are too easily swayed. Some basic facts are helpful.
There were 8 million unsold houses after the 2008 collapse. Now there are 2.3 million, and prospects for an upturn in construction -- one of the mainstays of the U.S. economy -- are good.
The country's Gross Domestic Product is now higher than at any time before the recession. American corporations are highly productive, profitable and sitting on huge amounts of cash. Credit from the banks has somewhat eased up and is certainly better than in the first two years of the recession.
Job growth, though modest, is better than in the troubled areas of Europe. Unemployment is serious, but once again it is better than in almost every European country. The economy is growing at a modest 1.9 percent, but Europe is either in recession or growing at a smaller rate, including Germany.
With these facts in hand, there is no reason to believe that the country is headed in the wrong direction, unless you happen to be unemployed or fearing cuts in Social Security and Medicare. I am not minimizing those huge problems. But we have the strongest economic base in the world, and leaving emotion aside, this is a period of global deflation and market shifts. It's painful but cyclic, as the economists say.
On the emotional front, giving the facts their due, the best course is to be cautious but forward-looking. The country isn't going over a cliff. Despite Republican obstructionism, jobs have come back. The private sector has returned to pre-recession levels, so the major job losses are in local and state government and in manufacturing sectors that cannot compete with China, Korea, India, and South Asia. Around two billion people are rising to a sustainable level of income in Asia, and although America may have to level off in our standard of living, or even see a drop, on moral grounds the dispossessed of the world deserve a decent existence -- this country has always stood for equality, after all, and this is a major step in that direction.
The source of anxiety that we can relieve with sane government policy has to do with foreign wars and social entitlements. The American middle class has stagnated economically since the Reagan era. There needs to be wholesale tax reform and a program to stabilize Medicare and Social Security. These can only be accomplished with bipartisan cooperation, but since that doesn't exist, people will just have to calm their nerves and wait 12 to 20 years before looming disaster forces reform.
In the meantime, the Democrats need to keep being the voice of economic justice. To the enduring shame of the right wing, their constant drumbeat of low taxes, unfettered military spending, foreign wars, grossly inflated anti-terrorism scares (and expenses) and scandalous favoritism to the rich has been a drag on society for thirty years. The Democrats have hopped on board or been too cowed to resist when they should have loudly protested. But that's blood under the bridge by now. By any measure, America needs to take better care of its citizens, especially in the face of lost pensions and benefits in the private sector. In this election year, both candidates promise jobs, jobs, jobs, but the real issue is human welfare. Free market capitalism has made this country rich, but it has left a fraying safety net. If you want to avoid panic in the future, you have to make people feel safe now, using more than Al Qaeda scares and reactionary ideology to cover over real problems.