Can any of my doom-and-gloom-economy readers tell us what an economic recession is? By definition, it's two consecutive quarters of negative growth (contracting economy). We don't have the numbers in yet for the 1st quarter of this year, so we can't know yet whether or not we're in a 2nd quarter of negative growth.
Why we go through so much hand-wringing over these cyclical occurrences, I don't know. The economy can't grow forever. It stops, takes a breather, then picks up again. Market forces. To steal a line from the new Battlestar Galactica: all this has happened before, and it will happen again.
But when Republicans hold the White House and there's a possibility of a recession--I've been hearing about recessions since January 2001--you'd think we're one step away from 1933. So what's our current situation? A little perspective is always helpful, brought to us by Power Line via Instapundit:
I'm sorry to see unemployment climb to 5.1%, but by historic standards, that's not exactly a "grim picture." For example, nothing like the unemployment rates that, along with runaway inflation, propelled Ronald Reagan to the presidency in 1980. But I wondered about a more recent comparison. Do you remember 1996, when Bill Clinton swept to an easy re-election victory over Bob Dole, on the basis of what pretty much everyone in the press considered a near-perfect economy? No "pink slip nation" in 1996!
Actually, though, the unemployment rate in November 1996, when Clinton rode a soaring economy to victory, was 5.4%. That's right--three tenths of a percent higher than the "grim picture" of a "pink slip nation" painted by this month's unemployment report.
To all those people who expect the President to "run the economy"--think about exactly what that means, and what you expect him to do. Tell me exactly what President Clinton did to make such a great economy.
Presidents can affect the economy positively in only a couple ways. They can sign into law bills passed by the Congress, bills that economists tell us will help an economy--like tax cuts. They can lead from the bully pulpit to encourage tax cuts. And they can choose, every decade or so, a new fed chairman. Anything else?
There are lots of things a president can do to affect the economy negatively--like put 1/7 of it under federal control, a la HillaryCare. Raise taxes. Put on a sweater on national tv and tell your fellow Americans to make do with less.
Now I know what you lefties are dying to say. "The war is draining our economy!" Check out the percentage of GDP our military is eating up today--in a kinda-shooting war--and compare it to 1945 (WWII), 1952 (Korea), 1969 (Vietnam), 1979 (no war), 1985 (no war), and any year in the mid-90s, then try to justify your claim. Lefties, I won't post any comment of yours about the economy and the war unless you do this. It's my blog, my rules.
Update: Instapundit adds another post this evening, saying
This may well be true; we're overdue for a recession -- we haven't had a really deep one in over 25 years -- and my sense is that there remains a lot of economic idiocy still to be wrung out of the system, which is what recessions are for.
Speaking for myself, though, I'm not an econo-blogger. I tend to be over-pessimistic, but I guess I have tuned out a lot of the media econo-doomsaying because they've been predicting massive economic collapse for pretty much my entire sensate life and so far it hasn't come. Plus, at the moment they're playing their usual pre-election gloom-and-doom game in the hopes of helping the Democrats.
Which doesn't mean that the economy is necessarily doing better than they say, since their bias is exceeded only by their laziness and ignorance. As I noted some years ago about their Iraq reporting, the fact that they're transparently playing up bogus bad news doesn't mean that there isn't genuine bad news that they're not reporting, because reporting that would require knowledge and effort. So you can't just apply "Kentucky windage" and assume that things are better than the reports say. They may actually be worse, just in a different way than is reported . . .
Pretty much true.
Update #2, 4/9/08:
Here are more comparisons with 1996. Love how those goalposts change.
I wonder how many of those who are complaining about a slowing economy are from industries, such as construction and manufacturing that hired a large number of undocumented workers? It would seem that since there are now enough Americans to fill the shrinking job counts,that those people are probably unnecessary to production at this time. Just a thought.
ReplyDeleteI just heard another interesting tidbit-obama is talking about raising the taxes on entrepreneurs. The total amount now with state taxes is right around 45-50%. Obama is talking about raising the cap to make it where the total tax liability is around 65%. That will crater Mom and Pop businesses and cause those who open businesses to make money to think twice. Too many jobs are created by small businesses in this nation and if you want a scenario where a recession can turn into a depression, the unemployment numbers with this tax hit could do it.
ReplyDeleteSince the rate of growth for the fourth quarter of 2007 was a positive .6 percent, we would have to show negative growth for the first two quarters of 2008 to be in recession.
ReplyDeleteThank you for your statement about percentage of GDP. We rarely hear of this standard because it is inconvenient to those who want us to be in a recession, i.e. Paul Krugman, and his boys. Economists are mostly a joke much as are weather forecasters and Al Gore. When I took economics courses in college they always told us that you can't accurately predict the economy. Case closed.
ReplyDeleteThere is one and only one cause of the economic turmoil that we are just begginning to experience today: the printing of money.
ReplyDeleteYou must understand that the paper (fiat) currency we use were originally certificates for gold(real money). The constitution says only gold and silver can be used as a tender in payment of debts. We started exchanging these certificates(dollars) because it was the same as trading real gold, because thats what they represented. The problem with todays system is that the paper we use no longer represents gold in the bank, it represents nothing. Politicians have 3 ways of paying for things..Taxing(which runs into resistance from citizens), borrowing, and last but not least inflation(printing money and destroying the currencies value). The latter is the most favorable way since it pays for things without any of the publics consent. The United States does all of them. The point is is that politicians only have the power to inflate if the currency isnt backed by gold. If we were still on the gold standard, the government would have to limit its spending and they wouldn't be able to sustain the ridiculous things that are going on such as iraq, or universal healthcare. This is also the reason why the price of oil, precious metals, commodities and the basic necessities are rising dramatically.
We had a chance to fix it, by electing ron paul, but unfortunately america fucked up once again.
Tying currency to gold limits how much your economy can grow, though, because you can't grow faster than your supply of gold.
ReplyDeleteAnd Ron Paul himself may want to return to the gold standard, but electing him wouldn't get that plan through Congress.
To Anonymous at 6:48 PM, I would ask you that if the gold standard was so great, why was it that we had many similar up and down cycles in the economy while it was in effect?
ReplyDeletehttp://www.f-ckingc-nts.com/wp-content/uploads/doonesbury-deficit.gif
ReplyDeletehttp://www.lafn.org/politics/gvdc/Natl_Debt_Chart_2006.gif
Isn't that just a little striking?