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A bad joke once defined a recession as you not having a job, while a depression is me not having one. There is, unfortunately, a great deal of truth in this rather flip quip.

As the American economy is currently structured - largely capitalist supported with socialist welfare systems amounting to two-thirds of the Federal budget - a recessionary tendency is built in to the very structure of our economic institutions. Even where some economic indicators are not currently in decline, mounting government and personal debt, the trade imbalance, and the home mortgage disaster have put the economy in a very dangerous position. A few more crises, whether economic, political, or terrorist, and the situation is ripe for a full-blown depression, if not a full-scale economic meltdown.

This predicament is firmly established on the wage system, the means whereby, in both capitalism and socialism, the ordinary worker gains the bulk of his or her income. Wages are the price of labor. As the objective value of labor falls with advancing technology or as cheaper labor becomes available in other countries, adequate income levels for ordinary people (and thus effective demand) can only be maintained by raising wages with no corresponding increase in productivity, personal borrowing, charity, or State redistribution through confiscatory taxation.

Unfortunately, borrowing (whether by individuals or the State) to make up for inadequate effective demand as well as redistribution is like trying to get out of a hole by digging it deeper. Going into debt to purchase assets that pay for themselves out of the income they generate is beneficial, even necessary to keep an economy viable, but going into debt to purchase consumption goods and services or for government spending, or taking from the less-poor to give to the more-poor only makes a bad situation worse.

The bizarre construction we call modern economic policy is governed by the assumptions put into place by John Maynard Keynes. In the Keynesian framework, there is necessarily a tradeoff between inflation and employment. If you want low inflation, you put up with high unemployment. If you want low unemployment, you put up with high inflation. When, as now, these assumptions are no longer valid, the economy as a whole goes into a tailspin, with high unemployment and high inflation competing to see which can break the back of ordinary citizens faster.

Ultimately, the question is not whether the United States economy is in a recession.

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