Recession

Karen Gililand discusses important issues monthly

Columnist Karen Gililand discusses Recession

Factoring Recession

The word recession is defined as the decline in economic trade and prosperity. In 1982, under the Reagan Administration, working class Americans became well acquainted with this definition when the national unemployment rate rose to 9.7%, funding for social programs were slashed and the poverty rate for African Americans was more than 30%. Today, working class Americans wrestle with their paychecks to make ends meet while pundits and politicians with six-figure salaries spend countless hours in debate over the impact of the current economic crisis with no end in sight. While the economy and a looming recession have become political hot topics during this presidential campaign season, many people struggle to understand why it is becoming increasingly difficult to maintain the American Dream.

Last year, when gasoline prices climbed to more than $3.50 per gallon, Americans were outraged at the soaring prices though they continued to fill their tanks in the hope that prices would go down by the end of the summer. One year later the national average for unleaded gasoline is $4.11, and the public is beginning to grasp the fact that the price of gasoline may never go down. With increasing energy demands from China, speculators predict that the price for foreign oil will have Americans paying more than $5 per gallon by 2009. Alternatives to gasoline consumption include ethanol, a biofuel made from corn. Supporters for ethanol production cite that it is a clean-burning fuel made from renewable sources, it decreases dependence on foreign oil, and production boosts the economy by creating jobs. However, as reported in The Guardian an internal World Bank study sites biofuel production as the leading cause for the dramatic increase in food prices worldwide. The United States Bureau of Labor and Statistics has reported that food costs rose by 5.8 percent in 2007. High percentage increases have been seen in everything from meat to dairy products and bread. Per Robert Gavin of The Boston Globe, an increase in food prices decreases the amount of discretionary income, the money that keeps the retail industry thriving and drives the United States’ consumer-based economy.

In addition to the high price of gasoline adversely affecting the economy is the crisis in the housing industry and a continued increase in home loan foreclosures. The Association of Community Organization for Reform Now (ACORN) reports that African Americans are issued high cost loans 2.7 times more than their white counterparts, and African American women receive subprime mortgages at a higher rate than any other group. Community action groups and the NAACP have sought a moratorium on foreclosures for African American and Hispanic homeowners who are disproportionately affected by subprime mortgage lending. Leaders believe that subprime loans have specifically targeted at risk communities resulting in the increased number of foreclosures today. BBC News reports that in a six month period California had seen a 264 percent increase in the number of foreclosed homes auctioned off. Housing and mortgage industry woes have caused speculation as to the soundness of lending institutions like California’s IndyMac Bank which resulted in a depositors’ run on the bank in recent days. Rumors of the Treasury and the Federal Reserve on stand-by to bail out Fannie Mae and Freddie Mac (the nation’s largest lending institutions) has the country on edge as it becomes more and more likely that Americans will have to tighten their belts and redefine some aspects of lifestyle.

Whether politicians or speculators are ready to deem this nation is indeed in a recession, working class Americans that have suffered from job outsourcing, inflated energy and food costs, and a collapse in the housing industry feel the status of the economy has been clearly defined.

-Karen Rowe Gilliland