Name that tune.
There was ample reason for such grave-dancing. Between July 1, 2008, and June 30, 2009, total U.S. economic output, adjusted for inflation, dropped at an annual rate of 3.8 percent—the worst 12-month decline since 1946. The unemployment rate, which started 2008 at 5 percent, had doubled by the fall of 2010. The number of jobs fell for 21 months in a row, and by May 2010 the median unemployed worker had been out of work for 23 weeks—compared with 10 weeks in the depths of the 1973-75 recession.
The quarter-century that began shortly after Ronald Reagan’s election had been widely viewed as a period in which a free-market approach had proved its superiority to state direction of economies. In the -United States, cutting top income tax rates in half, reducing regulatory burdens, and spreading free trade seemed to have produced significant prosperity and remarkable stability. Between 1983 and 2008, gross domestic product grew at an average of 3.2 percent annually. Only once did output fall in a calendar year, and that was by just two-tenths of a percentage point. Inflation, interest rates, and unemployment were tame.1
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