Katrina = Recession?

The United States has been teetering on the edge of economic problems, in my opinion, for quite a while, contrary to the statistics that the government is so happy to produce showing that GDP and productivity is growing. I never bought into the fact that things were actually getting that much better since the early part of 2000. Here in the state of Michigan, we are experiencing the highest rate of unemployment than any other state in the nation. Gas prices hit $3.50 a gallon today. Now I fear that this country faces a very frightening moment in its history.

Katrina has done more damage than we could have ever imagined. It has done far more than the 9/11 terrorist attacks. The U.S. Senate has just passed an emergency bill for $10.5 billion dollars for assisting the states devastated by the storm. Though necessary, it will have long-term effects on US debt for decades. Meanwhile, the price of gas and oil has soared greatly in days. (Actually, it has been on a path to reach $3.00 for quite some time.)

How will this country react to all of this? Where are all of the homeless going to live? How long will it take to get oil production back to its normal levels before the storm? These are all important questions that will determine the economic future of this country for some time. We are dangerously close to miring ourselves into another recession very quickly. And I don't know if there are any answers to the problem.

President Bush spoke today urging consumers not to buy gas unless necessary. Is this a predecessor to the rationing of gasoline that this country faced in the 1970's? If so, consumer confidence will definitely decline sharply. I believe that many people are already facing economic problems with rising debt and the possibility of a dangerous housing-bubble that is ready to burst. Now this tragic event has pushed the country to a point it has not been experienced since 9/11.

If the price of gasoline continues to climb, consumers will have less disposable income to spend on other things. In fact, I wouldn't even define it as disposable income. For many people, the money that is necessary to spend on gas and heating fuel will mean less money for clothing and food. Others may not be able to make debt payments. This is just the beginning, unfortunately.

Alan Greenspan better take notice that now is not the time to raise interest rates any further. Inflation is not an issue any more. The reason there is inflation is not because of "too much disposable money or high salaries" but the fact that the rising cost of fuel has caused the CPI to rise. As for the gasoline issue, I still believe much of it is a case of price gouging rather than one caused by demand being greater than the supply. Examples of this can be seen everywhere as gas prices vary greatly from gas station to gas station within the same counties within the states.

The sad part is that many people are touting the possible economic boon that will arise when the devastated gulf states need to be rebuilt. Not only is this callous and cold as many people suffer today from lack of medicine, water, food, and shelter, but should not be looked upon as an economic opportunity.

Let us hope that the many nations that the US helps whenever they are in need choose to help us in our time of need. And let us hope that our government is paying attention to the events that have transpired in New Orleans as people are desperate for food and water. Basically, there is a mini-revolution going on. By the way, why hasn't Martial Law been imposed in the area. We need strong leadership right now in this area to stop the chaos and help these people. When people have lost everything and have nothing, they have nothing else to lose by stealing and looting. Dire economic times could have the same effects across the country. Robberies and gas station run-offs are becoming predominant in the area that I live in already where official unemployment is near 20 percent but closer to 30 or 40 percent.

Let's all remember the suffering that is occurring throughout the country, especially those affected by Katrina. Please donate to the Red Cross and Salvation Army if you are able to. Even though many of us are financially hurting, remember that many are worse off than ourselves. **************************************** Copyright 2005, Jason Liptow, webmaster of Social Studies Made Simple
About the Author

BA in Social Studies and MSBA in Operations Management from Madonnna University, and teaching certification from Saginaw Valley State University. Webmaster of www.socialstudiesmadesimple.com.