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We'll never know what fixed this economy

| Thursday, May 21, 2009

Ten reflections on a recession halfway through:

• History will debate, but with no way to prove, whether the helping hand of government is ending it or extending it. If Washington had allowed one more failure in Wall Street or one less, if General Motors and Chrysler hadn't begged more taxpayer billions en route to bankruptcy ... ah, what if?

• If it ends in a real bad inflation, this recession will turn off a whole new class of citizens on the American dream. The savers. The very folks whose instinct is to take care of themselves instead of depending on government. They're mad already at what the crash has done to their retirements. What hyperinflation would do is scary.

• Home prices are coming down so new people can buy them. Will other high-priced things come down — tuitions, health care, government itself• All are held up by various "bubbles," mostly the illusion that somebody else will pay.

• If times get worse, could we see high local taxes targeted for what they are, a high cost of living• Even as they have brought down the balloons of auto, steel and airline workers, the premium compensation of public employees will be unmasked as unsustainable.

• Raise taxes in a downturn• In effect that's what the Port Authority is doing with fare hikes. Forget losing more customers, the rights and wrongs are cockeyed, too. People who need the bus to get to work will pay more, seniors will still get a "free" ride by skimming the state lottery, mostly funded by poor people. Give it an F in economics.

• The stock market's spring rise is the best grade earned so far by the new team in Washington. But share prices could tumble again, the bottom is yet to be "tested," many believe. We're into an adventurous new national spirit — of caution.

• Let's admit a measure of grim satisfaction in the largest auto company in the world reporting its first net loss ever. Now Toyota knows what America's Big Three found on top. And without the excuse of their union. And their managements.

• The crash of nest egg values in 401(k) accounts invested in the stock market is the wrong lesson to take from the recession. Corporate pension funds took the same hit but they are institutionally organized to ride it out until markets recover. So should 401(k) holders.

• GM and Chrysler lost much of what's left of their goodwill by cutting nearly 2,000 dealers (and their employees). The big beneficiary of bailout-bankruptcy: the United Auto Workers. Now let's see how they'll like dealing with the union in the plants.

• Will American investors ever again fully believe in American investments• When the largest banks are "too big to fail" but not to wipe out shareholders. And when manufacturers too big to fail — think autos — get union bosses in control of the boards.

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