A Misleading Report

Updated September 20, 2010, 08:35 PM

Arnold Kling is an adjunct scholar with the Cato Institute and a member of the Financial Markets Working Group of the Mercatus Center at George Mason University. He is the author of "Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy." He writes for Econlog.

I disagree with the recession-dating decision. Employment declined by nearly one million workers in the four months after the supposed end of the recession. Even now, it is not clear that a recovery has started. To say that the recession ended 15 months ago is to tell a misleading story.

We're in the middle of three separate crises, none of which has been resolved.

We are in the middle of three crises. The first crisis, the failure of the securitization model in finance, is being papered over. Washington and Wall Street are trying to return to this failed model, which can only survive on the basis of subsidies provided by the Fed, Freddie Mac and Fannie Mae.
The second crisis is a crisis of political legitimacy. The political center has collapsed, with each political party soon to be dominated by its "irreconcilables," the Tea Party on the Republican side and the Democratic wing of the Democratic Party on the Democratic side.
The third crisis is a sovereign debt crisis that is pending for the United States. As the opportunity to adjust entitlement spending to a realistic path slips away, the probability increases that we will experience a sudden loss of confidence in the solvency of the U.S. government.