Great Depression? This isn't even close

Jim Stratton

May 4, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- Unless you've been trapped in the wreckage of your 401(k) for the past six months, these four words have been inescapable: Since the Great Depression.

It has appeared in the print media more than 3,000 times. It's the mother of all recession reference points. It's the parenthetical phrase with a chilling kick.

But to Bill Kane, the words ring hollow.

"Personally, I don't see anything that bad," said Kane, a retired school administrator from Winter Park. "You just can't compare it."

Kane, 86, comes to his conclusion through experience. He survived the Great Depression growing up in western Pennsylvania. He saw neighbors in relief lines for bags of flour. And he shared a four-bedroom house with 13 members of his immediate and extended family.

"We were one of two families in a town of about 2,500 people who weren't on relief," Kane said. "It seemed like everybody got hit."

Experts say Kane is on target. Things are really bad right now, but by virtually every measure, the Great Depression was far worse. It may be the only reassuring thing about the current global downturn.

"I don't know of any economist who thinks we're heading for another Great Depression," said William Seyfried, a professor at Rollins College. "Not even the most pessimistic."

Douglas Holtz-Eakin, the top economic adviser to former presidential candidate Sen. John McCain, put it this way: "It is to me inconceivable that they will be similar in scope. They are not even close to each other."

Today: Hands-on tactics

In part that's because the government response this time -- while flawed in the minds of some economists -- was nonetheless much stronger than the hands-off approach favored in the early days of the Great Depression. It's also because the nation has a far-reaching safety net that didn't exist 75 years ago.

Those factors conspired in the 1930s to produce a series of numbers -- and social costs -- that by today's standards are hard to fathom.

By some estimates, unemployment hit almost 25percent. The nation's gross domestic product sank by roughly one-quarter. About 10,000 banks failed.

In communities across the country, families calculated not how much money they had lost in the stock market but how much food they could afford. Kane was a boy at the time, but he remembers the dread that settled over Brockway, a town northeast of Pittsburgh.

"The market crashed on my seventh birthday," he said. "I can see the headlines now."

To get by, Kane and his family planted vegetable gardens on either side of their house. They owned a single cow and made their own butter and milk. Two years after the crash, he, his mother and two siblings moved in with his grandparents. They were joined by two uncles and their families.

"My bed was on the floor," Kane said.

The current recession has not yet -- and likely won't -- produce the grinding poverty witnessed by Kane and a generation of Americans. Huge numbers of people will lose homes, but no one expects to see shantytowns of canvas and cardboard -- so-called Hoovervilles -- springing up outside cities across Florida or the nation.

Unemployment will continue to rise, but most projections say it won't crack 11 percent. The official forecast for Florida is 10.2 percent. The gross domestic product is expected to fall 3percent to 4percent, far less than the plunge seen during the Depression. It took 3 1/2 years to hit bottom during the Depression -- though its effects were felt all decade -- while experts think this recession might end in half that time. This month, it becomes the longest recession since 1921.

"It's not the Great Depression," Seyfried said. "But it probably is the Great Recession."

'Double-dip' scenario?

In recent weeks, the economic slide has slowed, prompting President Barack Obama to mention "glimmers of hope."

But good news is spotty. Even when a turnaround gains traction, there is risk of a "double-dip" recession similar to the one the U.S. had in the early 1980s.

The most striking similarities between today's economic meltdown and the Great Depression are in how they played out.

Both followed the popping of a bubble. In the 1920s, investors leaned heavily on credit to buy stocks. This time around, consumers took on huge debt to cover inflated home prices. Both came amid a growing gap between rich and poor, and both quickly became global.

But economists of all stripes say the United States is much better positioned to cushion the impact of the current financial free fall. Programs such as unemployment insurance,Social Security, food stamps, Medicaid and Medicare offer help to the most vulnerable. Those options weren't available 75 years ago.

The Federal Reserve has moved to keep money flowing by reducing bank interest rates. The government, meanwhile, approved a $700 billion bank bailout and $825 billion stimulus and recovery package. Bank deposits are protected by up to $250,000 in insurance that didn't exist when Jeanette Meisel was growing up in DeLand.

Meisel, now 81 and living in Orlando, remembers a bank run that hit her town. The phenomenon swept the nation as panicky clients tried to rescue their cash.

"My mother tried to get our money out, but she couldn't," she said. "She got there just as the bank locked up."

It was a grim time for everyone, she said, one that puts today's problems in perspective.

"I still remember a conversation between my mother and father," said Meisel. "She said, 'We can't do that; we only have 10 cents left until payday.' Something like that, you don't forget."

1930s

* Unemployment: Peaked at almost 25% by some estimates.

* Decline in gross domestic product: About 25%.

* Duration from peak to trough: 43 months

2000s

* Unemployment: Estimates range from 10% to 11% nationally.

* Decline in gross domestic product: Estimated from 3% to 4.5%.

* Duration from peak to trough: About 18 to 24 months.

Newstex ID: 34627781