The 2007-2009 recession, already in the record books as the worst in the 66 years since the end of World War II, was even worse than previously thought. 
 
 FILE - In this Jan. 21, 2010 file photo, a crowd of people walk during the morning rush hour in New York. The 2007-2009 recession, already in the record books as the worst in the 66 years since the end... (Associated Press) 
 
 From the start of the recession at the end of 2007 to the end in June of 2009, the U.S. economy shrank 5.1 percent. That is 1 percentage point worse than the previous estimate that the recession reduced total output during that period by 4.1 percent. 
 
 The new estimates emerged from the annual revision of economic data prepared by the Commerce Department's Bureau of Economic Analysis and released Friday. 
 
 Among the previous 10 postwar recessions, output in only two dropped by more 3 percent. In the 1957-58 recession, the economy contracted 3.7 percent. And during the 1973-1975 downturn, the economy fell 3.2 percent from the start of the recession to the end. 
 
 The government attributed the bigger declines in output in part to weaker consumer spending and business investment than previously estimated. 
 
 By year, the government's new figures show that the economy took a much bigger hit in 2009, when output shrank 3.5 percent. The previous estimate had shown a decline of 2.5 percent that year. 
 
 In 2008, the new estimate shows the economy contracted by 0.3 percent. The previous estimate had indicated that output was unchanged for that year compared with 2007. 
 
 The last recession began in December 2007 and lasted until June 2009. Though the economy has been growing since then, growth has been subpar. And the unemployment rate has remained elevated; it's now 9.2 percent. 
 
 The revisions showed that growth in 2010 was a bit stronger than previously estimated. They put growth for all of 2010 at 3 percent, up from a previous estimate that the economy grew 2.9 percent last year. 
 
 The revisions to the country's gross domestic product, the total output of goods and services, used more complete data for such items as consumer and business spending. 
 
 The government's annual revisions are released each July, along with its first estimate of growth for the April-June quarter of the current year. ||||| If you’re looking for one overarching explanation for the still-terrible job market, it is this great consumer bust. Business executives are only rational to hold back on hiring if they do not know when their customers will fully return. Consumers, for their part, are coping with a sharp loss of wealth and an uncertain future (and many have discovered that they don’t need to buy a new car or stove every few years). Both consumers and executives are easily frightened by the latest economic problem, be it rising gas prices or the debt-ceiling impasse. 
 
 Earlier this year, Charles M. Holley Jr., the chief financial officer of Wal-Mart , said that his company had noticed consumers were often buying smaller packages toward the end of the month, just before many households receive their next paychecks. “You see customers that are running out of money at the end of the month,” Mr. Holley said. 
 
 In past years, many of those customers could have relied on debt, often a home-equity line of credit or a credit card, to tide them over. Debt soared in the late 1980s, 1990s and the last decade, which allowed spending to grow faster than incomes and helped cushion every recession in that period. 
 
 Now, the economic version of the law of gravity is reasserting itself. We are feeling the deferred pain from 25 years of excess, as people try to rebuild their depleted savings. This pattern is a classic one. The definitive book about financial crises has become “This Time Is Different: Eight Centuries of Financial Folly,” published in 2009 with exquisite timing, by Carmen M. Reinhart, now of the Peterson Institute for International Economics, and Kenneth S. Rogoff, of Harvard. 
 
 Surveying hundreds of years of crises around the world, Ms. Reinhart and Mr. Rogoff conclude that debt is the primary cause and that the aftermath is “deep and prolonged,” with “profound declines in output and employment.” On average, a modern financial crisis has caused the unemployment rate to rise for more than four years and by 7 percentage points. (We’re now at almost four years and 5 percentage points.) The recovery takes many years more. 
 
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 THE notion that the United States needs to begin moving away from its consumer economy — toward more of an investment and production economy, with rising exports, expanding factories and more good-paying service jobs — has become so commonplace that it’s practically a cliché. It’s also true. And the consumer bust shows why. The old consumer economy is gone, and it’s not coming back. 
 
 Sure, house and car sales will eventually surpass their old highs, as the economy slowly recovers and the population continues expanding. But consumer spending will not soon return to the growth rates of the 1980s and ’90s. They depended on income people didn’t have. 
 
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 The choice, then, is between starting to make the transition to a different economy and enduring years of stop-and-start economic malaise . 
 
 The easy thing now might be to proclaim that debt is evil and ask everyone — consumers, the federal government, state governments — to get thrifty. The pithiest version of that strategy comes from Andrew W. Mellon, the Treasury secretary when the Depression began: “Liquidate labor, liquidate stocks , liquidate the farmers, liquidate real estate,” Mellon said, according to his boss, President Herbert Hoover . “It will purge the rottenness out of the system.” 
 
 History, however, has a different verdict. If governments stop spending at the same time that consumers do, the economy can enter a vicious cycle, as it did in Hoover’s day. 
 
 The prospect of that cycle is one reason an impasse on the debt ceiling , and a government default, could do so much damage. Global investors may be the only major constituency that has been feeling sanguine about the American economy. If Washington unnerves them, and sends interest rates rising, the effect really could be calamitous. 
 
 But the debt-ceiling debate doesn’t have to be yet another problem for the economy. The right kind of agreement could help soften the consumer bust and also speed the transition to a different kind of economy. 
 
 What might that agreement look like? First, it could reduce deficits in future years, to keep investors confident that Washington too could begin living within its means after years of excess. 
 
 Second, a deal could avoid the Mellon-like problem of having government cut back at the same time as consumers. The Federal Reserve, the Obama administration and Congress seemed to learn this lesson in 2009, when they aggressively responded to the crisis, only to turn more passive in 2010 and spend much of the year hoping for the best. It didn’t work out. Today, the most obvious options for stimulus are extensions of jobless benefits and of a temporary cut in the Social Security tax . 
 
 But they probably shouldn’t be the only options. The biggest flaw with the past stimulus was that it imagined that the old consumer economy might return. Households received large tax rebates, usually with little incentive to spend the money (the cash-for-clunkers program being the exception that proves the rule). People did spend some of these across-the-board rebates, and kept economic growth and unemployment from being even worse, but also saved a sizable portion. 
 
 A more promising approach could instead offer a tax cut to businesses — but only to those expanding their payrolls and, in the process, helping to solve the jobs crisis. Along similar lines, a budget deal could increase funding for medical research and clean energy by even more than President Obama has suggested. These are the kinds of investments that have brought huge returns in the past — think of the Internet, a Defense Department creation — and whose price tags are tiny compared to, say, Medicare or the Bush tax cuts . 
 
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 Politics, of course, makes many of these ideas unlikely to happen anytime soon. Unfortunately, though, these debt-ceiling talks won’t be the final chance for Washington to help the country recover from the great consumer bust. That’s the thing about consumer busts. They last for a very long time.
– We already knew the Great Recession was the worst in decades, but in fact we were even worse off than we thought, new figures show. The economy shrank 5.1% over the course of the recession, from 2007 to 2009—1 percentage point worse than the earlier estimate of 4.1%, the AP reports. Only two in the past 10 recessions saw a squeeze of more than 3%. And yes, the economy is now growing—but it expanded only 1.3% from April to June, the Commerce Department said, lower than expected. Officials also revised the growth figure for the first three months of the year to 0.4%, compared to an earlier estimate of 1.9%. That means that the past 6 months have seen the least growth since the end of the recession. Among the reasons: Gas prices, less consumer spending, and smaller government, notes the Atlantic. Combine these figures with the debt ceiling crisis, and it’s “like hearing about the Hindenburg on the day the 6-mile meteor hits the earth,” said a blogger.