I’ve covered this pretty thoroughly in the past (see here), but this great infographic from the Washington Post explains in 2 minutes why this doesn’t feel like a recovery and why it will likely feel like a recession for much longer than most would like to admit:

“The nation’s economic woes boil down to this. Compared with a healthy economy, about 7 million working-age people and 5 percent of the nation’s industrial capacity are sitting idle, not producing what they could. The economy is growing again, but at a rate — less than 2 percent in recent months — that’s too slow to keep up with a population that keeps increasing and workers who keep getting more efficient.

This is the output gap, the divide between the amount the United States can produce and what it is actually producing. The gap, currently $900 billion, explains why we feel so miserable more than a year into what is technically classified as an economic recovery.”

See here for the full graphic.

Source: Washington Post

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

More Posts - Website

Follow Me:


  1. TPC: I suspect your estimate of the earliest time for the end of this balance sheet recession might be highly optimistic. Over the last thirty years economic policy has favored capital over labor (meaning people, not just labor unions} and has prevented labor from enjoying the rewards of the gains in productivity during that period. I suspect that politicians realized this and so the Fed allowed the easy money that led to the credit bubbles in order to keep the economy growing and politicians in office. What I don’t see is any change in economic policy, so I can’t see the U.S. improving for a long time. I realize you know more about this than I, but would you not think that this looks more like Japan than maybe the 82 US recession?
    An example of the mindset of the politicians is the recent tax break for small business. Mark Haynes on CNBC pointed out that the problem with small business was a lack of sales and that tax breaks wouldn’t help, but Congress gave them tax breaks anyway. It seems logical that Congress would want to put money into the hands of the consumers rather than the producers. There seems to be something about Washington, DC that warps a person’s mind.

    • “put money into the hands of consumers”. OK, how would you propose that Obozo do that? Increase monthly food stamp and welfare payouts per head? Extend unemployment insurance to 60 months? Cut taxes on anyone making under $100,000 per year to zero and an “earned income tax credit” (the most absurd euphamism of all time) of $5,000 for all of those “workers”? And to pay for that, how about raising federal tax rates on all income over $200,000 to 50%, all income over $500,000 to 80%, and the corporate tax rate to 50%.

      Yes, this would “put money into the hands of consumers”. It would also collapse the economy into a severe depression that would threaten the survival of the Republic.

      Socialism does not work. As Ronald Reagan said: “a socialist is someone that reads Marx and Lennin; a capitalist is someone that understands Marx and Lennin”

      • Your suggestions of how money can be put into the hands of consumers reveal an underlying political context, which you clarify in your “socialism does not work” paragraph.

        One would hope that B.O., with the guidance/urgings of an intelligent Congress, would immediately start reducing the activities and size of government. An enormous amount of Federal money is spent each year on programs that are simply wasteful.

        The money so saved must flow back to taxpayers – both consumers and businesses – via reduced taxation and fees, across the board. Doing so involves no elements of welfare or socialism. Rather, additional money becomes available for consumption and investment by the people, who are far better equipped to effectively employ their resources than is Washington, D.C.

        As we have learned in the past 2 years, elections have consequences. There’s one coming up in a few weeks. It’s well past time that the sludge of Congress be cleaned out so that an intelligent Congress can begin to make decisions based on sound economic and financial considerations, not political B.S.

    • Anonymous,

      You have followed the data of recent well, but you missed out on the fact that several sources including the NFIB have said that Obama’s small business tax breaks not only will not help small businesses but will hurt them if they were to use them. Also it has been well documented on Youtube videos for several years that the mess we are in was caused by Democrats trying to force lending institutions to make home loans to people who did not have good credit. Yes it was crazy but that was what Barney Frank, Chris Dodd and the rest of the Democrats wanted and they forced it through. Now we will be paying for their bad policies for years to come. And Republicans ( including the Bush administration) did try to rein in that policy many times and were shouted down by Frank, Dodd, Maxine Waters and others ( also on Youtube videos That are easily accessed).

  2. Pod: In order to improve the economy I think the government should quit relying on monetary policy and switch to fiscal stimulus. Some of the solutions used during the thirties would be a good start. I would like to see some public spending on infrastructure such as roads, the power grid, schools, libraries, and green energy. Also, I would like to see a shift to a more progressive tax structure in order to put more money into the hands of the consumer. And, a jobs bill is need in order to give everybody who will work a job. The government is needed to do this as private enterprise needs to be guided. The idea of Mr. Market running the economy needs to be discarded. It has been proven horribly wrong.
    Also, Pod, I would like to hear some of your ideas about how to improve the economy. Please let us know what they are.