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Today’s article is Recession Lingo by Laurie Frankel.  I thought this would be an appropriate article to write about because many of us don’t keep up wit the latest news, and are, on occasion, confused by the terminology that develops.  This article, specifically, is about the terminology surrounding the recession.

I will give a brief definition here, but if you want the full description, check out the original article.

• Bailout – This was the money designated for and given out to struggling businesses (usually very large businesses) whose closure would negatively impact the economy.  Had, for example, an automaker like Ford closed, thousands of people would have been out of a job.  However, the financial situation of the business was such that it wasn’t making enough money to support itself or it’s employees.  Think about that…businesses that don’t make money (aka a profit) can’t pay their employees and have to shut down.  That is the way things are supposed to happen (not that I wish a job loss on anyone, but unfortunately, jobs come and go…luckily, qualified people find new jobs, or start their own businesses and make their own way).  Some (myself included) would argue that by using taxpayer dollars to keep these types of businesses functioning, we are all (taxpayers) collectively paying the salaries of these people, and paying for the business to stay afloat. 
  • On a slightly different (but not too different) topic, the “cash for clunkers” program, which offered a $3500 to $4500 voucher that a consumer could give to a new car dealer and get that amount off of the purchase price of a new car.  These vouchers were paid for out of the bailout program, which means that the vouchers were covered with taxpayer dollars.  That means that if your neighbor got a new car with the “cash for clunkers” program, you are providing some of the money to cover their discount…i.e., you paid for part of their new car. 
• Consumer Confidence – This is a gauge of how the average consumer feels about the economy (whether or not it is strong and relatively safe, or weak and unsafe) at that time, and what is coming in the future.  Unfortunately, if people aren’t informed, their response or confidence in the economy can be misguided.  Stay informed!
• Deflation – A decline in prices across the country.  While this sounds fantastic, it can cause problems.  Prices falling means people are spending less and can lead to more unemployment.
• Depression – A long recession.  It typically includes business and/or bank failures, high unemployment, falling job wages and, in general, economic collapse.  A depression lasts significantly longer than a recession, and while a recession can be considered a normal downturn (on occasion) in the economy, a depression is not normal.
• Recession – A generally accepted definition is a decline in economic activity lasting at least two quarters (6 months).  As stated above, this can be a normal business cycle, and the recession we are currently in is considered the 11th recession since World War II.  
• Stimulus -  This is part of the Government’s fiscal policy.  Fiscal policy is the use of government spending and revenue collection (i.e. tax collection) to influence the economy.  Stimulus, in particular, is a short term government intervention to encourage spending when they economy is weak.  An example of this is a tax rebate, like the May 2008 tax rebate, where payments of  $300 for singles and $600 for married filing jointly were issued.  Some interesting points…people who have “no net tax liability”, which basically means they don’t actually pay taxes, still received this TAX REBATE, and people who made more than $75,000 single ($150,000 married filing jointly) received an adjusted (lower) amount.  As the income increased, the rebate gets phased out.  So, people who didn’t pay taxes get a tax rebate, and people who pay A LOT more taxes get a  reduced tax rebate.  Interesting, huh?

Hope these terms help you feel a little more in the loop the next time you find yourself in a conversation about the economy!  To do more research, go here.