Recession is now officially declared to have ended in June 2009, but the National Bureau of Economic Research (NBER), which makes such assessments with a time-lag, points out that economic activity typically remains “below normal” in the early stages of recovery following recession and “at times well into the expansion”. This only underlines the severity of the longest recession in US post-war history with unemployment stubbornly high at 9.6 per cent.

But end of recession makes little sense to large sections of the middle classes disenchanted with President Obama's failure to produce 'quick fixes' to turn the economy around and generate job growth. They are becoming easy prey for the Republican campaign portraying the Government as one seeking to enlarge itself and spending large without producing jobs, and adding to deficits and debt burdens for future generations to bear.

US economy grew by a mere 1.6 per cent in the second quarter and seemed still on a low pace of activity in the third quarter. The Federal Reserve, taking note of the recovery slowdown, indicated on September 21 it would be prepared to provide additional accommodation, if needed, to support economic recovery and get inflation, subdued for long, higher. Lengthening low inflation induces concern about deflation which has to be countered by boosting growth.

Essentially, it would mean Fed buying large quantity of bonds to drive down long-term rates and making borrowing cheaper for businesses and households. This action, in line with its past unconventional methods to combat recession, may follow after Fed updates its growth forecasts for the economy. Its earlier projection of 3 per cent in 2010 seems unlikely. Meanwhile, for an extended period, the near zero Federal Funds rate would continue.

OECD Survey of US Economy on September 20 puts growth at 2.6 per cent in 2010 and for 2011. The US economy has entered a “soft patch” but OECD sees no new recession or recovery strong enough to make an early dent on unemployment. Significantly, though less noticed in US media,, there is broad endorsement of the Obama Administration's stimulus of last year and unemployment benefits, its medium-term fiscal deficit reduction plan as well as health care and financial regulatory reforms.

Describing the health care law as an” important landmark”, the Survey notes it addresses the threat to fiscal sustainability from the long-term growth in public health spending. It would be effective in achieving budget savings if future administrations and Congress do not over-ride its provisions. The Republicans are hoping to repeal the health enactment if they get a majority. OECD has spelt out measures for rebalancing the post-crisis economy with tax policy changes and putting public finances on a sustainable path..

The economy is the dominant concern of Americans even as sections of opinion worry about soaring deficits and Federal Government debt with the entire scare the Republicans are trying to create against the Administration policies. Curiously, Republicans want both tax cuts and freeze in spending, and clamour for indefinite extension of the Bush regime tax cuts due to expire at the end of 2010. President Obama has taken a tough stand that he would only be willing to extend the tax cut for middle class families earning 250,000 dollars and below, and not for the wealthy which would cost 700 billion dollars over a decade. That would not help in reducing deficit.

President Obama hurled himself into the midterm campaign as opinion polls favoured Republicans with rising cacophony from Tea Party activists for tax cuts and dismantling federal agencies while his own Democrats seemed dispirited in general. Taking a series of Town Hall meetings, Mr Obama sought to convince Americans of the soundness of his Administration's policies, both for the short and long term, designed to secure jobs and welfare of the middle-class and lay the foundations for sustained economic prosperity. Ninety-five per cent of the working families had been given a two-year tax holiday under his last year's 787-billion dollar stimulus legislation.

The financial system was saved from meltdown and stabilized, he said. The automobile industry had staged impressive recovery with jobs intact through loan assistance. The health care and financial regulatory reform enactments this year have codified, for the first time, rights and protection for the consumer against abuses whether in the matter of health insurance, credit cards or home mortgage. While the economy has been rescued from the brink, and “we are in the right direction” with policies to promote investments and create jobs in businesses, large and small, he agrees, “we are not there yet” as it would take some time to overcome fully a crisis of unprecedented depth.

Democrats are hoping to scrape through keeping their majority, given the President's vigorous campaign to put across persuasively his policies to bring a turnaround and lower unemployment and Federal deficits, and more importantly, divisions in the ranks of Republicans due to the activities of the leader-less Tea Party groups which have pushed down Republican nominees in primaries especially in half a dozen Senate races.

After being dubbed by Democrats as a party for cutting taxes for billionaires and millionaires and forsaking the middle class, serving “special interests” of business and markets, Republicans came out on September 23 with a “Pledge to America” manifesto - To slash taxes and spending, cut down government regulations, repeal President's Obama's health care law, and restore the country for a “better future”.

All these, Democrats said, lacked specifics and made it clear that Republicans wanted to take America back to the failed policies that caused the Great Recession. Nor had Republicans clearly committed themselves against privatizing Social Security and Medicare, one of their cherished goals. (IPA Service)