"The American dream in reverse." That is how U.S. President Barack Obama responded to news about the sinking American economy. His remarks are no exaggeration. One major U.S. company after another has announced job cuts and layoffs. And the evidence is more than anecdotal: According to the Commerce Department, the U.S. economy has registered its worst performance in 25 years. The need for action is clear. While there are understandable concerns about ensuring that stimulus measures are used effectively, this is not the time to be overly focused on deficits. Delay will only compound the current pain and increase the burden to be borne by future generations.
The U.S. economy shrank at a 3.8 percent annual rate in the last three months of 2008. The decline — an initial estimate that may change as more data come in — comes on the heels of a 0.5 percent drop in gross domestic product in the previous quarter. For all of 2008, the U.S. economy grew just 1.3 percent. That is the weakest performance since 2001, when the terror attacks of Sept. 11 and the collapse of the technology-industry stock bubble contributed to anemic 0.8 percent growth.
The 3.8 percent contraction is the worst quarterly performance since 1982; and, sad though it was, the figure was better than most economists expected. If inventory buildup is excluded, the fall exceeded 5 percent.