Economists: More Pain, Then Gain

Anyone who has ever embarked on a weight-loss regimen that includes vigorous exercise is familiar with the old adage — "No pain, no gain."

Apparently, the same pearl of wisdom can be applied to the current economy.

Chris Isidore of CNNMoney.com reports that a survey of economists reveals that they are "forecasting a far deeper and more painful recession ahead in the first half of the year, but a modest pickup in the second half of 2009, followed by a solid recovery in 2010."

Well, the first quarter — in which a 5% decline in economic activity is expected — is nearly two-thirds behind us now. A decline of 1.7% is expected in the second quarter. Then, according to the economists, a 1.6% increase looks likely in the third quarter.

The bad news for the unemployed is that the jobless rate is predicted to rise to 9% by the fourth quarter of the year. That isn't the double-digit figure that many people have mentioned, but it is higher than the 7.5% rate that economists predicted previously.

Remember, this isn't written in stone. It is subject to change — whether the conditions that will lead to such a change will be positive or negative remains to be seen.

Whenever I hear about a survey of economists, I am reminded of a line that has been attributed to Harry Truman: "If you lined up all the economists end to end, they'd point in different directions."

I suppose skeptics would argue that, if economists were blessed with some special insight or possessed a crystal ball that would tell them what the future held, there would have been ample warning that could have empowered the rest of us to avoid this mess.

Then again, I guess the flip side would be that many economists did, in fact, warn people what might be coming — and few, if any, listened to them.

So, it seems to me, the best that can be said is that there is light at the end of the tunnel — but it seems to resemble those optical illusions that one encountered in those old houses of mirrors that used to be found at carnivals (I don't know if you can still find those houses of mirrors on carnival midways anymore — it's been a long time since I've been to a carnival).

The optical illusion, in this case, is that the "tunnel" appears to be longer than anyone, including most economists, initially thought it was.

And the light should (logically) grow brighter as confidence returns.

But that, it seems, will take awhile — and, unfortunately for the unemployed, the light beckoning them to the tunnel's end won't get stronger until employers have regained enough confidence to hire more people.

So how severe is the recession? According to John Blake of CNN, comparisons to the Great Depression of the 1930s are erroneous. He thinks the more appropriate comparison is the Panic of 1873, when "[t]he stock market crashed. Wall Street panicked. People stashed silver and gold under mattresses while businesses shut doors across America."

There are some significant differences between 1873 and 2009. Some are not comparable, particularly the technology that is available today that wasn't even dreamed of in the 19th century. But some are — such as the quality of presidential leadership. In 1873, Republican Ulysses S. Grant had just been sworn in for his second term. He never made any decisive efforts to alleviate the economic crisis, and, in the next year's midterm elections, Democrats wound up taking control of the House for the first time in nearly 20 years (senators would not be elected by direct vote until the next century).

In 2009, Democrat Barack Obama has just taken office, and he has made decisive action on the economy his top priority.

Of course, everyone wants to know when things are going to get better. It reminds me of a movie I saw more than 15 years ago, "Leap of Faith," which was about a faith healer and a farming community that was slowly dying from a severe drought. All the residents of the town who came to the faith healer's shows wanted to know when rain would return and save their crops.

If the film is to be seen as an analogy of the American economy in 2009, the "town" is the nation and the faith healer is Obama. But can he tell us when it will rain again?

And that leads me to another survey from CNN.

Paul Steinhauser reports that a new national poll finds that nearly three-fourths of Americans are fearful about the way things are going in the country.

The same survey also suggests that more than three-fourths of respondents felt that things were going well for them personally, but CNN's polling director had an explanation for that. "Americans always believe things are better in their own lives than in the rest of the country," he said. "But they are realists as well — they recognize that bad times somewhere else in the U.S. may eventually come to affect them."

If confidence is the name of the game, Americans still show confidence in their new president, slightly more than a month since he took office. CNN reports that two out of three Americans approve of the job he is doing.

And that is a crucial piece of the overall puzzle. If the president inspires confidence, that can make a big difference — even if it is psychological.

What Obama says in his speech to Congress tomorrow night — and how well it is received by the lawmakers — can have an enormous psychological impact on those who listen to what he has to say.