Thanks to the St. Louis Fed’s new ability to make data-charting easier, Paul Krugman shows us a graph of the tragic waste in the current U.S. economy. The blue line is potential GDP. The red line is actual GDP.

The gap between the black horizontal lines on the chart is half a trillion dollars. So the shortfall as of the end of the graph (Nov 2010), i.e., the difference between the red and blue lines, is almost $1 trillion (click to enlarge).



Even if our economy were now functioning at full capacity (and it’s far from that), the lost output from 2008-2010 would still linger in the form of lost profits, lost wages, and lost jobs. Only the jobs can be recovered (not money you could have made and didn’t), and that only if the economy grows at a faster rate than 2.5% (the stay-even point for job creation).

This is a tragic waste:

[W]e’re now sacrificing output we should be producing, goods and services that we have the capacity to produce but aren’t producing due to insufficient demand, at the rate of more than $900 billion a year. By the way, the cumulative loss since the recession began is almost $2.8 trillion. So next time someone tells you that it would be irresponsible to engage in more stimulus, monetary, fiscal, or both, ask: in what universe is wasting almost a trillion a year, not to mention the human costs, a responsible thing to do?

This is an economic and human waste, to be sure. But it’s also a tragic political and national waste. Thanks to the Tea Party, Movement Conservatives (McConnell & Boehner), and NeoLiberals (Obama, Clinton & co), all operating together, we are on a locked-in course to make this problem worse. It’s now guaranteed.

In a time when the future (of manufacturing, of engineering R&D;, of scientific research) is abroad, can the country afford to wound itself to this degree — just so our billionaires (right and center) can stay fat and happy?

Krugman is certain we can’t.

What to do — Believe me, many are searching for alternatives. The progressive movement is sorting its options with great urgency. My own thinking, for what that’s worth, is that if the plan is to work within the system, it’s time for all this grassroots organizing to identify leaders.

The Obama-experience (the shock and betrayal that many feel) has been especially dispiriting, but in my view, that shouldn’t stop the search. Without Washington, the president could have become a president-for-life; without Lincoln the Civil War could have produced a far different, far more broken result; and without FDR, the Depression era could have easily coughed up something seriously anti-democratic. (More on FDR and his magnificent role in a bit.)

Ask yourself: What happens in 1968 if Eugene McCarthy doesn’t challenge Lyndon Johnson? (For starters, Bobby Kennedy doesn’t enter the race.)

We should be identifying leaders now, in my view, as quickly as we can, since only leaders can coalesce a movement, give it a focus (leaders are necessary, but not sufficient, as I’ve written elsewhere). Elizabeth Warren? Alan Grayson? Bernie Sanders? Raul Grijalva? (Matt Damon?) Someone else?

I’m not arguing for any of those names (most have the flaw of being party-loyalists when parties are not our friends). But again — assuming we want to work within the system — a good strategic move would be to aggressively grow the list of people to woo, and to make that a high priority. It’s a doable task, and appropriate to the time.

GP