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March 26, 2013

Mortimer Zuckerman: The Great Recession Has Been Followed by the Grand Illusion

The Great Recession is an apt name for America’s current stagnation, but the present phase might also be called the Grand Illusion—because the happy talk and statistics that go with it, especially regarding jobs, give a rosier picture than the facts justify.

The country isn’t really advancing. By comparison with earlier recessions, it is going backward. Despite the most stimulative fiscal policy in American history and a trillion-dollar expansion to the money supply, the economy over the last three years has been declining. After 2.4% annual growth rates in gross domestic product in 2010 and 2011, the economy slowed to 1.5% growth in 2012. Cumulative growth for the past 12 quarters was just 6.3%, the slowest of all 11 recessions since World War II.

And last year’s anemic growth looks likely to continue. Sequestration will take $600 billion of government expenditures out of the economy over the next 10 years, including $85 billion this year alone. The 2% increase in payroll taxes will hit about 160 million workers and drain $110 billion from their disposable incomes. The Obama health-care tax will be a drag of more than $30 billion. The recent 50-cent surge in gasoline prices represents another $65 billion drag on consumer cash flow.

February’s headline unemployment rate was portrayed as 7.7%, down from 7.9% in January. The dip was accompanied by huzzahs in the news media claiming the improvement to be “outstanding” and “amazing.” But if you account for the people who are excluded from that number—such as “discouraged workers” no longer looking for a job, involuntary part-time workers and others who are “marginally attached” to the labor force—then the real unemployment rate is somewhere between 14% and 15%.”

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Read Mortimer Zuckerman’s full Wall Street Journal opinion piece here

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