If a wholly Great One rules, the people hardly know that he exists. Lesser men are loved and praised, still lesser ones are feared, still lesser ones are despised. How thoughtful one must be in what one says! The work done, business takes its course, and all people think: "We are free." - Lao Tzu
If the story of the current U.S. economy were made into a movie, it would look something like ''55 Days at Peking.'' A ragtag group of ordinary people -- America's consumers -- is besieged by a rampaging horde, the forces of recession. To everyone's surprise, they have held their ground.
But they can't hold out forever. Will the rescue force -- resurgent business investment -- get there in time?
The screenplay for that kind of movie always ratchets up the tension. The besieged citadel fends off assault after assault, but again and again rescue is delayed. And so it has played out in practice. Consumers kept spending as the Internet bubble collapsed; they kept spending despite terrorist attacks. Taking advantage of low interest rates, they refinanced their houses and took the proceeds to the shopping malls.
But predictions of an imminent recovery in business investment keep turning out to be premature. Most businesses are in no hurry to go on another spending spree. And those that might have started to invest again have been deterred by sliding stock prices, widening bond spreads and revelations about corporate scandal.
Will the rescuers arrive in the nick of time? Not necessarily. This movie may not be ''55 Days at Peking'' after all. It may be ''A Bridge Too Far.''
A few months ago the vast majority of business economists mocked concerns about a ''double dip,'' a second leg to the downturn. But there were a few dogged iconoclasts out there, most notably Stephen Roach at Morgan Stanley. As I've repeatedly said in this column, the arguments of the double-dippers made a lot of sense. And their story now looks more plausible than ever.
The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off. But the Fed chairman's crystal ball has been cloudy lately; remember how he urged Congress to cut taxes to head off the risk of excessive budget surpluses? And a sober look at recent data is not encouraging.
On the surface, the sharp drop in the economy's growth, from 5 percent in the first quarter to 1 percent in the second, is disheartening. Under the surface, it's quite a lot worse. Even in the first quarter, investment and consumer spending were sluggish; most of the growth came as businesses stopped running down their inventories. In the second quarter, inventories were the whole story: final demand actually fell. And lately straws in the wind that often give advance warning of changes in official statistics, like mall traffic, have been blowing the wrong way.
Despite the bad news, most commentators, like Mr. Greenspan, remain optimistic. Should you be reassured?
Bear in mind that business forecasters are under enormous pressure to be cheerleaders: ''I must confess to being amazed at the venom my double dip call still elicits,'' Mr. Roach wrote yesterday at cbsmarketwatch.com. We should never forget that Wall Street basically represents the sell side.
Bear in mind also that government officials have a stake in accentuating the positive. The administration needs a recovery because, with deficits exploding, the only way it can justify that tax cut is by pretending that it was just what the economy needed. Mr. Greenspan needs one to avoid awkward questions about his own role in creating the stock market bubble.
But wishful thinking aside, I just don't understand the grounds for optimism. Who, exactly, is about to start spending a lot more? At this point it's a lot easier to tell a story about how the recovery will stall than about how it will speed up. And while I like movies with happy endings as much as the next guy, a movie isn't realistic unless the story line makes sense.
A housing bubble to replace the Nasdaq bubble. Good one, Krugman!
WASHINGTON—Billy Raye, a 51-year-old unemployed bike courier, is looking for work.
Fortunately for him, the Mid-Atlantic Regional Council of Carpenters is seeking paid demonstrators to march and chant in its current picket line outside the McPherson Building, an office complex here where the council says work is being done with nonunion labor.
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Jennifer Levitz/The Wall Street Journal
A protester pickets a building contractor outside the McPherson Building in Washington last month.
"For a lot of our members, it's really difficult to have them come out, either because of parking or something else," explains Vincente Garcia, a union representative who is supervising the picketing.
So instead, the union hires unemployed people at the minimum wage—$8.25 an hour—to walk picket lines. Mr. Raye says he's grateful for the work, even though he's not sure why he's doing it. "I could care less," he says. "I am being paid to march around and sound off."
Protest organizers and advocacy groups are reaping an unexpected benefit from continued high joblessness. With the national unemployment rate currently at 9.5%, an "endless supply" of the out-of-work, as well as retirees seeking extra income, are lining up to be paid demonstrators, says George Eisner, the union's director of organization. Extra feet help the union staff about 150 picket lines in the District of Columbia and Baltimore each day.
Online postings recruit paid activists for everything from stopping offshore drilling to defending the Constitution.
In California, one group is offering to pay $10 and up per hour to activists to hold signs in demonstrations against foam cups and plastic bags.
In Bellevue, Wash., the Faith and Freedom Network plans to hire activists for about $10 an hour next month to promote statewide candidates with Judeo-Christian values for the fall elections, says Gary Randall, the group's president. Recruits will knock on doors and will be dispatched in large groups, hoping to draw media attention, he says.
Pierce Hutchings, a Chicago businessman and baseball fan, staffed a rally at Wrigley Field on the Cubs opening day in April by posting an ad on Craigslist offering $25 of his own money to anyone willing to show up.
The cause? To protest plans to erect a big Toyota advertising sign in left field. The sign drew criticism from many Chicago residents and merchants who said it would impede their rooftop views of games. About 50 people showed up, put on yellow "No Sign @ Wrigley" T-shirts supplied by Mr. Hutchings, and urged passersby to call their local elected officials. The sign was put up anyway.
While the money offers some relief for the unemployed, plugging a cause, even one that seems worthy, can be dispiriting.
"I told one guy today that I was fighting global poverty, and he looked me in the eye and said, 'I don't care,'" says Stephen Borlik, a new college graduate posted outside a D.C. subway stop recently as a $13-per-hour street fundraiser for CARE, the antipoverty nonprofit organization in Atlanta.
Mr. Borlik moved here in May after graduating from Central Michigan University in Mount Pleasant. He is living with his brother while looking for a job. "It can be extremely frustrating sending out résumé after résumé and getting no response. It almost makes you not want to do anything."
To keep his job at CARE, Mr. Borlik says, he must hit a weekly quota of new donors giving a minimum of $20. A CARE spokeswoman says "team members" in the organization's "Face-to-Face" fund-raising program have a goal of two new donors per day.
In Atlanta, Timothy Baker, a 40-year-old unemployed warehouse worker, says his money-making strategy has been to walk picket lines for $8.50 an hour for the Southeastern Carpenters Regional Council. "It's something to do until you find something better."
While many big unions, including the International Brotherhood of Electrical Workers, frown on using nonmembers in picket lines, "we're not at all ashamed," says Jimmy Gibbs, director of special projects for the Southeastern Council. "We're helping people who are in a difficult situation."
For four hours at the recent Mid-Atlantic carpenters' union protest in D.C., about 50 picketers-for-hire—some smoking cigarettes, reading the paper, or on their phones; a few leaning on canes—walked in a circle outside the McPherson Building. The place is home to a Starbucks, a spa and offices. "Some days, the beat is very good," said James Harff, chief executive officer of Global Communicators LLC, a public-relations concern, tapping one foot in his second floor office. Other days, he can hardly hear himself think.
"Low Pay! Go away!" and "That Rat Gotta Go!" the union stand-ins chanted as other workers banged cow-bells and beat on a trio of empty plastic buckets. Eric Williams, a 70-year-old retiree who said he needs extra cash to buy groceries, wore a sign saying that Can-Am Contractors, a nonunion Maryland drywall and ceiling concern, "does not pay area standard wages & benefits."
The target of the campaign is the Chicago School of Professional Psychology, which is opening new classrooms on the second floor of the McPherson Building, and is having renovations done, including dry-walling by Can-Am.
"It is bizarre," says Lynne Baker, a school spokeswoman, about the union's hiring of nonunion picketers.
Inside, Juan Flores, Can-Am's foreman, said his nonunionized workers are paid fairly. Of the protesters, he said, "I don't blame them—they need the money, but they look like they are drunk or something."
The union's Mr. Garcia sees no conflict in a union that insists on union labor hiring nonunion people to protest the hiring of nonunion labor.
He says the pickets are not only about "union issues" but also about fair wages and benefits for American workers. By hiring the unemployed, "we are also giving back to the community a bit," he says.
I thought the unions didn't get it. Obviously they do.
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