Can Obama's Budget Prevent Another Great Depression?

9 March 2009 - 5:00am

With housing values and sales continuing to plummet along with other major economic indicators, the concern should be about preventing a second great depression, not paying down the deficit, writes Dean Baker.

"[L]et's start with the bad news. The National Association of Realtors reported that existing home sales fell below 4.5 million for the first time since the mid-90s. They also reported that the median house price dropped another $5,400 in January or 3.1%.

Since July, this series shows a drop in the median home price of 18.9%. Other data also showed house prices in a free fall, most notable the commerce department's series on new home sales, which showed a drop of 10% in the median price between December and January. With vacant housing units at record levels, and many potential home buyers no longer having the equity in their current homes for a down payment, it is difficult to see how this free fall stops any time soon.

Remarkably, much of the discussion of the budget did not focus on Obama's agenda, but rather his deficit targets...[But] with the economy plummeting, the first priority of the administration and Congress must be to boost the economy."

Source: Guardian (UK), March 2, 2009
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In short, we’ve seen the last of the cheap oil on which we’ve built our economy, our communities, and our daily lives.