By Marc Seltzer; originally published July 12, 2009, at politicsunlocked.com
As I watch news coverage of the ongoing economic crisis and responsive stimulus legislation, I am constantly reminded of Abbott and Costello’s “Who’s on First” routine, where the comics discuss names of their team’s baseball players:
Abbott: Well, let’s see, we have on the bags, Who’s on first, What’s on second, I Don’t Know is on third…
Costello: That’s what I want to find out.
Abbott: I say Who’s on first, What’s on second, I Don’t Know’s on third.
Costello: Are you the manager?
Costello: You gonna be the coach too?
Costello: And you don’t know the fellows’ names?
Abbott: Well I should.
In October 2008, when the sky was falling, and several of the biggest entities in the financial system collapsed, economists and journalists couldn’t bring themselves to say the “R” word.
We were deep in a Recession, as it turned out. This recession started nearly a full year earlier, in December 2007. But the National Bureau of Economic Research(NBER), which makes the call based on economic statistics over a period of months, allowed us to endure the near collapse of the financial system without an official proclamation.
Costello: Well then who’s on first?
Costello: I mean the fellow’s name.
Costello: The guy on first.
Costello: The first baseman.
While economists and journalists did focus on the credit crisis, conveying the dire nature of what they were seeing, and making suggestions that we might be heading toward the unthinkable – a Great Depression Sequel – we still couldn’t use the word Recession.
Then, in December (after it was announced we had been in a recession all along), the press sought to make up for lost time. Missing out on a full year’s worth of recession talk, they cut loose with a flurry of descriptors: a deep recession, prolonged recession, economic crisis, catastrophe, financial disaster and what may turn out to be true, the worst downturn since the Great Depression.
Costello: The guy playing…
Abbott: Who is on first!
Costello: I’m asking YOU who’s on first
Abbott: That’s the man’s name.
Costello: That’s who’s name?
Costello: Well go ahead and tell me.
Abbott: That’s it.
Costello: That’s who?
750 banks fell within months of the 1929 stock market crash which began The Great Depression. As many as 9,000 banks continued to fail during the 1930’s. FDIC Insurance was nonexistent, so people simply lost their money when their bank ran out of funds.
13 banks have failed so far in 2009. Another 25 failed in 2008.
The contemporary government response has been swift, if not altogether logical.
Deposits up to $250,000 are now guaranteed by the federal government. Under the TARP bailout program, banks may be given funds to keep them solvent and lending. There is a fair amount of confusion over the purpose of the program and whether healthy banks or failing ones are actually seeing the government support. Some initial money went to Citigroup, a behemoth multi-national organization considered “too big to fail” following the events in October of 2008, when investment bank Bear Sterns failed and cracked the confidence of the entire financial system.
Costello: Look, you gotta first baseman?
Costello: Who’s playing first?
Abbott: That’s right.
Costello: When you pay off the first baseman every month, who gets the money?
Abbott: Every dollar of it.
The initial $700 billion bailout was passed in November of last year and was renamed a recovery package in December. That was soon followed by a $789 billion stimulus bill. And as furious as we all are at the cost of this crisis, be ready for toxic asset and real estate stabilization plans which will likely total even more than these first two.
Only $500 billion of the stimulus bill is true government spending. The rest is tax relief or, in the case of the bailouts, investments in companies that should, in theory (it worked before in Sweden), allow the government to recoup the invested money in a few years.
Costello: All I’m trying to find out is the fellow’s name on first base.
Costello: The guy that gets…
Abbott: That’s it.
Costello: Who gets the money…
Abbott: He does, every dollar. Sometimes his wife comes down and collects it.
Costello: Whose wife?
The original stimulus bill was designed to create 2-4 million new jobs. Then, as the economy began losing a 500,000 jobs a month, the language changed to “save or create” 3-4 million jobs.
Politicians and pundits who say the stimulus bill will turn the economy around may overstate the case. So too, those who doubt it will save or create a single job.
A more reasonable assessment is that it will soften the blow and make a long-lasting recession more tolerable.