How memorable are these recessions?
- From: Me <agnescherry@xxxxxxxxx>
- Date: Fri, 24 Oct 2008 13:56:48 -0700 (PDT)
By Daniel Gross
Posted Monday, December 30, 2002, at 11:57 AM PT
http://slate.msn.com/id/2076134
President Bush opened his final radio address of the year this way:
"In
2002, our economy was still recovering from the attacks of September
the
11th, 2001, and it was pulling out of a recession that began before I
took office."
Bush concluded 2002 with the same dishonesty that defined his
economic
policy throughout the year-a mendacity that ranged from denying the
tax
cut had anything to do with the re-emergence of the deficit to arguing
that the
terrorism insurance bill would create 300,000 construction jobs.
In fact, there is no evidence that the economy was in recession when
President Bush took the oath of office on Jan. 20, 2001. Yes, growth
was
slowing, and the longest expansion in American history was running
out
of steam. But the U.S. economy did not go into recession until Bush's
presidency, according to both of the most accepted definitions.
One definition of recession is two consecutive quarters with a
declining
gross domestic product. By this measure, the economy was explicitly
not
in recession when Bush took the oath of office on Jan. 20.
According to the Commerce Department, the economy grew (albeit
slowly)
in both the third quarter and the fourth quarter of 2000, by 0.6
percent
and 1.1 percent, respectively. GDP did decline in the first three
quarters of 2001. So Bush would have been accurate in saying that
"when
I was inaugurated, the economy was three weeks into the first of
three
consecutive quarters in which GDP declined."
That definition of recession is a pretty blunt instrument. It doesn't
indicate exactly when a recession begins, which is why economists
rely
on the more precise measurements of the National Bureau of Economic
Research, the official arbiter of recessions and expansions. (Read
this
"Explainer" to learn how NBER works.) NBER has been run since 1977 by
Harvard economist Martin Feldstein, an architect of the Bush tax cut
and
an intellectual mentor to many prominent Republican policy-makers,
including Glenn Hubbard, chairman of the White House Council of
Economic
Advisers.
According to NBER's definition, the recession did not begin until
after
President Clinton left office. NBER's most recent "recession dating
procedure" says, "A recession begins just after the economy reaches a
peak of activity and ends as the economy reaches its trough." In
other
words, a recession begins as soon as the economy starts shrinking.
And
according to NBER, the economy peaked and started shrinking in March
2001, two months after the Bush presidency began. "The determination
of
a peak date in March is thus a determination that the expansion that
began in March 1991 ended in March 2001 and a recession began in
March."
So according to NBER, the most recent recession did not start during
the
Clinton administration. (Nor did the expansion begin under Clinton;
rather, it launched during President Bush the Father's term.)
Did the economy go into recession because President Bush came into
office? Of course not. Had Al Gore become president, would the
economy
have entered a recession in March 2001? Certainly. In hindsight, it's
clear we were heading for a recession in late 2000. President Bush
caught the wrong end of the business cycle. This air of retrospective
inevitability, combined with the bursting of the stock bubble and the
sense that 2000 signified the end of one era and the beginning of
another, lends credence to the false claim made by virtually every
Republican-from Bush down to congressional backbenchers-that the
economy
was in recession when Bush came into office.
The U.S. economy is a mighty, complex beast. And because it
frequently
takes a long time for economic perceptions to catch up with economic
realities, politicians can exploit the idea of recession unfairly.
Remember, even though the recession during the first Bush's term
ended
in March 1991, the perception that he wasn't sufficiently attentive
to
an ailing economy helped turn Bush out of office 18 months later. It
can
feel like a recession when an economy's growing and feel like the
economy's growing when we're in a recession. That's all the more
reason
why people, especially presidents, should take care when throwing
around
such loaded terms.
.
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