A New (Uncomfortable) Normal

Harold Meyerson, one of the 'true' liberals (i.e. not neo-liberal) writing for the Washington Post, writes today:

A disquieting phrase has entered our economic lexicon: "new normal." The
"new normal" economy that emerges from our recovery, many economists fear, won't
look like the old normal, the American economy of the past couple of decades. It
will look worse.

When I began writing this blog over a year ago, this was the major point I was making on the economy. On September 15, 2008, I wrote:

That is the situation we are in as a nation. We are effectively bankrupt,
though the hammer is yet to fall (or has been falling for about a year now, in
slow motion). There is so much debt, present and future, that it is hard to see
how we get out of this....

There are no simple, easy solutions for this national dilemma. I tend to
think that we're in for a wrenching, bitter experience, with our faux prosperity
slipping away from more and more of us. The only solution ultimately is to begin
to live within our means, as Andrew Bacevich put it recently. Among other
things, that means producing more, working harder, spending much less, borrowing
less, traveling less. There is going to be a much lower standard of living for
most everybody, though some at the lower end will feel this much more painfully.
The prosperity we have experienced for the last half century is basically over.
It is back to basics at every level of life.

Yes, a new normal, indeed.

But unlike Meyerson, I don't believe that government spending is going to solve the problem. I'm not necessarily against trying to put people back to work with government spending, like they did in the New Deal since that may be necessary to avoid a truly revolutionary situation, but on the other hand, going into more debt to do this is not really going to be a long term solution either.

I think the hard reality is that we are not going back to the prosperity of the several decades. What this means practically speaking is not easy to discern in detail, but I think it is possible to say that many people, particularly those in the middle to upper middle class, are in for a real shock as they confront a significantly lower standard of living.