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If you're like most people, you don't hold the economy in high regard. In fact, you probably think it stinks.

It's not for lack of effort. The Federal Reserve has created more than $2 trillion in new cash to go out and buy assets, including U.S. Treasury debt and mortgage securities, in an effort to get things moving. Short-term interest rates have been near zero since 2008.

The government has spent trillions more on stimulus packages, from then-President George W. Bush's stimulus checks in 2007 to President Barack Obama's $787 billion package to the payroll tax cut approved in December. There was the $700 billion bank bailout. The American International Group (AIG, news)bailout. The automaker bailout. The Bear Stearns dowry to JPMorgan Chase (JPM, news). Cash for Clunkers. Cash for washers. The homebuyer tax credit. The federal takeover of Fannie Mae and Freddie Mac.

And it wasn't just us. The Chinese spent $585 billion on a stimulus package. The French cut taxes on restaurant meals. Interest rates were cut around the world. Between August 2007 and May 2009 -- just before the recession officially ended -- the team at the ISI Group counted no fewer than 837 stimulative policy initiatives worldwide.

Yet through it all the economy has acted like a black hole, sucking in stimulus spending and cheap money and yielding very little in return. Each new effort, which carries ever-greater risk of inciting runaway inflation or a new government debt crisis, falls short. We can't resist the relentless gravitational pull of the Great Recession.

The good news is that the U.S. can escape this "black-hole economy," but it means tackling three huge political and economic problems that are keeping the recovery in check. Here's a look at what needs to happen.

Economists out of touch

Image: Anthony Mirhaydari

Anthony Mirhaydari

According to the economists, we're entering the third year of an economic expansion. But this black-hole economy is not something we're imagining. That's especially clear when you compare this recovery with the rip-roaring years in the 1990s -- the last time wages and living standards enjoyed a real boost. That was economic growth fueled by income gains, not one artificially inflated by easy credit and an epic housing bubble.

Today, unemployment has moved back above 9%. Incomes are stagnant. Prices are on the rise. Home values are falling again. The U.S. Treasury faces the specter of debt default. Health care and higher education are increasingly unaffordable for millions trying to achieve the American Dream.

The numbers tell a sad story. According to Credit Suisse, the economy is nearly 8% behind the typical recovery seen in the wake of a severe recession. Consumer spending is nearly 11% below where it should be. Business investment is nearly 19% too low. Wages are 9.5% too low.

It's no wonder that a majority of Americans believes the economy is in recession or depression, according to a recent Gallup poll.

The 3 hurdles ahead

There are several reasons all that stimulus hasn't worked.

The Europeans short-circuited the recovery last summer with the panic that led to the Greek bailout. There was talk of a double-dip recession. Fear returned to the financial markets.

Then, last August, Fed Chairman Ben Bernanke fended off the growth scare with a speech in Wyoming laying the groundwork for the $600 billion "QE2" money-printing stimulus that launched in November and is set to end next month. (For more on QE2, see my May 4 column, "How the Fed made the rich richer.")

But now growth is stalling again, with factory activity plunging and jobless claims rising. The European debt problem is flaring up and spreading from the periphery to semi-core countries like Spain and Italy. Japan, the world's third-largest economy, has fallen into a new recession.

The Citigroup U.S. Economic Surprise Index -- which drops when reported economic data come in below Wall Street's expectations -- has fallen to levels not seen since this past August. And the imminent end of QE2 has raised fears about what happens when you stop feeding the black hole.

The deeper issue here is that the United States is dealing with at least three big structural problems: the fallout from an epic asset price bubble and credit crisis; a runaway fiscal deficit and growing public debt problem; and the competitive implications of globalization. These are the sources of our black-hole economy.

Each one alone would be enough to limit an economic recovery and expansion. Combined, they explain why the results of the last three years have been so underwhelming.

The good news? There's a way out.

Beating the bubble

The first issue -- fallout from the credit bubble -- will simply take time, according to the work of Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard. Home prices must fall. Large debt piles must be repaid or restructured.

In their seminal work "The Aftermath of Financial Crises," they find that recessions resulting from bank panics are "protracted affairs" that dampen economic growth for a decade afterward. The job market takes a big hit, too, with unemployment jumping an average of 7% during the down cycle, which lasts an average of four years. We saw a 5.7% increase in the unemployment rate from March 2007, hitting a peak of 10.1% in October 2009.