A “Depression” by Any Other Name

President Harry Truman once said, “It's a recession when your neighbor loses his job; it's a depression when you lose yours.” And while economic experts may tell us that the current recession ended in June 2009, for almost 15 million Americans, this is still a depression.

According to the September 2010 report of the U.S. Department of Labor’s Bureau of Labor Statistics, 14.8 million people were unemployed in this country, an unemployment rate of 9.6 percent. That’s about the same as the unemployment rate for August, and down from the high of 10.1 percent in October 2009.

But these figures, while slightly encouraging, don’t tell the full story. They don’t count the number of under-employed in this country — people who are working part time but would prefer to be working more hours. Nor do they cover the millions of people who’ve been out of work so long they’ve stopped looking for a job. When you include these people — the Department of Labor’s “U6” category of unemployment — the September rate jumps to 17.1 percent.

The figures for long-term unemployment are even more startling. According to a recent analysis by the Pew Trust’s Fiscal Analysis Initiative as of August 2010, 4.4 million people (30 percent of all unemployed) have been out of work for a year or more; an increase of nearly 30 percent since December 2009.

In addition to the financial and emotional costs that such widespread and lengthy periods of unemployment can have on individuals and families, there are also increased burdens placed on government.

As people lose their jobs the amount they pay in taxes goes down, so government has less money. Meanwhile, demand for programs intended to ease the effects of the recession – unemployment compensation, food assistance, or any sort of economic stimulus plan – goes up. For example, according to the Congressional Budget Office (CBO), federal spending on unemployment benefits will total $160 billion in Fiscal Year 2010. That’s $39 billion higher than the previous year (up 33 percent), and more than five times what it was immediately prior to the recession, when federal spending on unemployment benefits ranged between $31 billion and $33 billion.

As bad as these figures are, they would have been worse had the federal government not acted. In February 2009 Congress enacted the American Recovery and Reinvestment Act (ARRA). Known as the “Stimulus” or “Recovery” Act, ARRA has helped reduce unemployment in each of the past three years, and will continue to do so into 2012. CBO estimates that ARRA will reduce the unemployment rate in 2010 by between 0.7 and 1.3 percent, and increase the number of people employed by between 1.3 million and 3.3 million.

This help doesn’t come cheap, however. CBO also estimates that the total cost to taxpayers for ARRA over the 2009–2019 period will amount to $814 billion.