Coming Soon: The Tea Party Recession of 2011?

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Back in 2008, during the worst of the financial crisis, I remember that many of us were shaking our heads a bit over Europe. American banks were clearly overleveraged, which led to the collapse of Bear Stearns and Lehman and Wachovia, and the near collapse of several others, but European banks mostly came through unscathed. Outside of Great Britain (and Iceland, of course), Europe suffered only a few bank failures, and they were pretty easily contained. And yet, European banks, on average, were more highly leveraged than ours. Shouldn’t they have collapsed even worse than ours? What gives?

Well, now we know: European banks were in worse shape than ours, but they were overleveraged in a different way that allowed them to hang on a couple of years longer. But now the jig is about up. Greece is about ready to fail, and after that, maybe Spain and Italy too. Ezra Klein talks to Desmond Lachman about what this means:

EK: And if some of these dominoes fall, how bad are things likely to get?

DL: What’s really at stake here is the European banking system. These countries might be relatively small, but if you just look at Greece, Ireland and Portugal, that’s $1 trillion in sovereign debt. If you add Spain, that’s another trillion. If you add Italy, that’s another $1.9 trillion. If the European banks take the hit, that could really cause another Lehman moment. It would be a credit crunch that would throw the European economy into a meaningful recession.

Bummer. But hey, that’s just Europe. At least we’ll be OK, right? Sadly, no. We’re highly exposed in a number of ways to trouble in Europe. In fact, it might even be worse this time around:

EK: And what are the chances that this leads us back into a recession?

DL: If you want me to depress you some more, let me tell you what really worries me. If we do go into recession this time around, what will be different from 2008 and 2009 is even if the recession isn’t as deep, we either don’t have the policy ammunition to fight it or we have convinced ourselves that we don’t have the policy ammunition to fight it. So what will the policy response be? Bernanke just showed you he thinks he has very little ammunition left. There’s no way Congress will go in for another big stimulus package. And the Europeans are tied up in the belief that they need to balance their budget.

Just remember: it doesn’t have to be this way, no matter how often and how loudly Republicans shriek about austerity and budget deficits. If we want them to, both monetary and fiscal policy can have plenty of bite left. Bottom line: If we plummet into a second recession, it will be solely the fault of fanatical conservatives in Congress who refuse for reasons both partisan and ideological to acknowledge that we can do something about this. It’ll be the Tea Party Recession of 2011.

WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

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WHO DOESN’T LOVE A POSITIVE STORY—OR TWO?

“Great journalism really does make a difference in this world: it can even save kids.”

That’s what a civil rights lawyer wrote to Julia Lurie, the day after her major investigation into a psychiatric hospital chain that uses foster children as “cash cows” published, letting her know he was using her findings that same day in a hearing to keep a child out of one of the facilities we investigated.

That’s awesome. As is the fact that Julia, who spent a full year reporting this challenging story, promptly heard from a Senate committee that will use her work in their own investigation of Universal Health Services. There’s no doubt her revelations will continue to have a big impact in the months and years to come.

Like another story about Mother Jones’ real-world impact.

This one, a multiyear investigation, published in 2021, exposed conditions in sugar work camps in the Dominican Republic owned by Central Romana—the conglomerate behind brands like C&H and Domino, whose product ends up in our Hershey bars and other sweets. A year ago, the Biden administration banned sugar imports from Central Romana. And just recently, we learned of a previously undisclosed investigation from the Department of Homeland Security, looking into working conditions at Central Romana. How big of a deal is this?

“This could be the first time a corporation would be held criminally liable for forced labor in their own supply chains,” according to a retired special agent we talked to.

Wow.

And it is only because Mother Jones is funded primarily by donations from readers that we can mount ambitious, yearlong—or more—investigations like these two stories that are making waves.

About that: It’s unfathomably hard in the news business right now, and we came up about $28,000 short during our recent fall fundraising campaign. We simply have to make that up soon to avoid falling further behind than can be made up for, or needing to somehow trim $1 million from our budget, like happened last year.

If you can, please support the reporting you get from Mother Jones—that exists to make a difference, not a profit—with a donation of any amount today. We need more donations than normal to come in from this specific blurb to help close our funding gap before it gets any bigger.

payment methods

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