Recession

Recession
The myth and the reality of the economic downturn

December 11, 2001

We’ve all heard that the national economy is in "recession," a phenomenon that is universally interpreted to be negative. Federal Reserve Chairman Alan Greenspan has cut interest rates several times to encourage spending, which means consumers can now buy a car at a deceptive 0-percent interest rate. Congress is working on an economic stimulus package designed to speed up the economy. Unemployment is sharply higher than it was at this time last year. The conventional wisdom is that Americans are reluctant to spend money because they’re worried that it may not be so easy to come by in the future.

On the other hand, the stock market seems to be recovering. Snow is falling in the high country and the ski season may not be a total bust after all. Gasoline is more affordable than it has been for a couple years; natural gas prices are down too. Discount-store and shopping-mall parking lots are full, and thanks to those low interest rates, we see a lot of new cars with temporary plates. Some money, at least, is being spent.

In fact, more may be circulating than the conventional wisdom would have us believe. Locally, sales-tax figures don’t show a downturn. In fact, they’re up from last year — not a lot, not as much as we’d all like to see, but certainly not down. That’s an important piece of information.

Recessions take on a life of their own because when consumers believe the economy is bad, they spend less, which worsens the problem, which frightens them more ... the downward spiral is obvious. Unfortunately, that downward spiral can be real even when the "feeling" that initially triggered it proves to be inaccurate.

Yes, things are tough in corporate America right now. The companies that leased space in the World Trade Center do business with most of America. Not only do their losses trickle down, they ripple through the economy in unexpected ways. A restaurant or motel in southwestern Colorado that has no ties to any of those corporations can still be affected when from New York who’d planned to visit suddenly find themselves without jobs or funds because a company three transactions removed from theirs has suffered losses.

That’s a real economic consequence, but it’s also one that’s grown, in local minds, to mythical proportions thanks mostly to Sept. 11. That myth needs to be compared to real data, and the community needs to deal with the reality of the downturn rather than the specter dominating the media.

In Southwest Colorado, the economy isn’t as bad as Wall Street and CNN would lead us to believe. It’s stable, it’s growing at a respectable rate, and it’s fairly well buffered from the effects of a national recession. When local business owners, investors and consumers are armed with the correct details — rather than being alarmed by vague reports of nationwide trends — their decisions are effective in keeping the local economy on track.