Two years ago, in June 2009, the American economy emerged from recession, according to the National Bureau of Economic Research. But as this week's Economist noted, with typical British understatement, "The recovery has been a disappointment."
And maybe not a recovery for long. Robert Shiller, the economist who first identified the housing bubble, said last week that we may be headed for recession again. "Whether we call it a double dip or not," he told Reuters, "there is a risk."
His Case-Shiller housing price index indicated that home prices in March slumped to levels not seen since March 2003, and Shiller says they may keep falling for 20 years.
As I look back on these years of economic tumult, I sometimes think of an off-the-record session arranged by National Review with Treasury Secretary Henry Paulson back in the fall of 2007.
I asked Paulson when the government was going to change the SEC regulation under which the credit-rating agencies were paid by the sellers rather than the buyers of securities. That arrangement gave the credit agencies an incentive to give high ratings to the mortgage-backed securities that later turned sour.
Oh, we'll get to that, Paulson said, when we get through the rough stuff we face right now. Of course, he had not yet gotten to the stuff that was so rough that, as he wrote in his memoir, he had to leave meetings to throw up.
With the benefit of hindsight, it seems that our leaders, in both the Bush and the Obama administrations, responded to crises and challenges all too often with measures that attempted to revive the old pre-financial crisis economy rather than with policies that would allow a new economy to grow.
As in Paulson's comment, the thinking seems to have been that if we can just get things back in place, then we can attack the underlying problems.
Such was the theory behind the now seemingly puny stimulus package agreed to by George W. Bush and Democratic congressional leaders in early 2008. And behind the Federal Reserve's rescue package for Bear Stearns in March 2008.
It was behind the argument that Paulson used to persuade Congress to pass the $700 billion TARP package in October 2008. He said he'd use the money to buy toxic mortgage-backed securities from the banks, but then decided to lend the banks tranches of $25 billion, instead.
The Obama Democrats' February 2009 stimulus package doled out one-third of its $787 billion to state and local governments so that public-sector employees (and union members) would not lose their jobs, as so many private-sector employees were. That worked for a while but did not prevent painful cuts and layoffs later.
Then there were the various mortgage forbearance programs, designed to prevent foreclosures. Precious few homeowners took advantage of them, and many who did ended up losing their houses anyway.
And of course there was cash for clunkers, which increased car sales in the summer only to see them decline in the fall. Hundreds of millions were spent, but with no permanent effect except to increase used-car prices because clunkers traded in had to be junked.
Decision-makers have responded as if they were facing liquidity crises (we don't have enough cash to pay off debts immediately) instead of solvency crises (we will never be able to pay off these debts). Too often pain has not been prevented, but just postponed -- and prolonged.
In retrospect, much of the pain could not be avoided. As economist Tyler Cowen has put it, we were not as rich as we thought we were. Housing bubble prices did not turn out to be real wealth, unless you sold out at the peak and moved to a cave.
Trying to put everyone back in the position they once thought they were in simply won't work. But it does sound attractive politically. People can remember what life was like in the past.
We don't, however, know what it will be like in the future. Republicans want less government spending and more leeway for entrepreneurs to create new businesses and jobs. No one knows what innovative products and services will emerge.
That's the beauty of free enterprise, but it also makes it a hard sell politically -- unless voters have figured out no amount of government spending is going to restore the old status quo.