Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It

Six Principles to Guide Our Recovery Efforts
1. The problems created by the most-severe recessions are typically bigger and longer-lasting than they first appear. Every year that goes by while masses of people are trapped and idled due to housing woes and high unemployment is not merely one lost year--it’s a loss that’s paid forward into future years as well, an accumulating deficit of skill, character, and regenerative ability that will restrain America’s growth potential for many years to come.

2. Again and again, our tendency in periods like this one has been to hunker down and wait for the bad times to pass. When bubbles pop and times grow hard, the animal spirits within all of us turn bearish, sometimes ungenerous, and deeply averse to risk. Unchecked, these sentiments can bias our thinking and actions in ways that are just as dangerous and counterproductive as bubble thinking itself.

3. Historically, as a result of these first two factors, we have tended to underestimate the true cost of remaining in periods like this one, and to overestimate the risks of aggressive action to try to hasten recovery. The bias in periods like this one has usually been toward doing too little; if anything, it should be toward doing too much.

4. This was not an ordinary recession, and ordinary responses will not fully end it. Boilerplate responses--cut taxes, raise spending--are insufficient given the nature and variety of these problems, and potentially dangerous if only bluntly applied. We need a combination of actions--some time honored, some novel--to restore our health.

5. True recovery is not simply a matter of jolting the economy back onto its former path; it’s about changing the path. We are in the midst of a major, global economic transformation, one that is steadily thinning the American middle class. The Great Recession has brought this into sharp relief, and in some ways has given us a preview of where America’s economy is heading. Many of the deepest economic trends that the recession has highlighted will take decades to fully play out. We can adapt successfully to them, if we start now.

6. Culture matters. A cultural separation is accompanying and reinforcing the economic sorting of Americans into winners and losers. Much of the nonprofessional middle class is slowly coming to resemble the poor in its habits and values; the rich are simply floating away from everyone else, not just financially but emotionally too. Both developments are profoundly unhealthy. Solutions to the problems of this era cannot be only economic. They must be cultural as well.