‘For the first time in a decade, our economy is in recession. It’s not official yet – the group that dates recessions doesn’t act until after the fact – but there’s little doubt that we’re in the midst of a downturn.”
That was economist Jared Bernstein back in December 2001. He went on: “The downturn is already taking a toll on those who traditionally bear the brunt of recessions, blue-collar workers in manufacturing, minorities, and other less-advantaged workers.”
That year saw only two non-consecutive quarters of GDP decline. The unemployment rate never got over 5.7%. And when the year was over, GDP had climbed 1%. But it’s still listed on the recession roster.
Today Bernstein, who sits on President Joe Biden’s Council of Economic Advisers, is trying to argue that, despite two consecutive quarters of a shrinking economy, we aren’t in a recession right now.
“What is a recession?” he and CEA chair Cecilia Rouse asked in a blog post. “While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle.”
Biden’s Treasury Secretary Janet Yellen, meanwhile, insisted that “This is not an economy that’s in recession. But we’re in a period of transition in which growth is slowing.”
On Thursday, Biden rattled off a few happy-sounding statistics before the cameras, then said “that doesn’t sound like a recession to me” before walking off stage without taking any reporters’ questions.
The media, not surprisingly, have dutifully picked up team Biden’s talking points, with stories everywhere saying that six months of economic decline are merely “flashing warning signs,” “raising alarms,” “inviting talk,” and “sparking debate” about a recession. CBS News says the “economy is creaking, but isn’t in a recession.”
This is gaslighting at its best.
As Michael Strain, director of Economic Policy Studies and senior fellow at the American Enterprise Institute, put it: “Out of the past 10 times the U.S. economy has experienced two consecutive quarters of negative economic growth, how many times was a recession officially declared?” he wrote on Twitter. “Answer: 10.”
The White House insists that we need to look at the bigger picture – not just GDP – to see what’s going on.
“It’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Biden said in a statement. “We are on the right path and we will come through this transition stronger and more secure.”
The right path? Really?
Real wages are in decline thanks to nearly double-digit inflation. Millions of people have dropped out of the labor force since Biden took office, making the unemployment rate look artificially low. Consumer confidence is hitting record lows. Interest rates are climbing. Oh, and polls show that most people believe we are in a recession right now.
So, if we’re going to start defining recessions down, why stop with this one?
We should certainly wipe the 2001 recession off the books. Compared with what’s happening today, that was a non-event.
Heck, why not pretend that we didn’t suffer a recession in 2020, either? After all, that entire “recession” only lasted two quarters, making it the shortest on record.
Yes, the economy dipped 5% in the first three months of 2020, when governments started issuing stay-at-home orders and forcing businesses to close in late March. The GDP then sank another 31% in Q2.
But then the economy roared back. GDP was up an astonishing 34% in the third quarter of 2020. That was followed by 4.5% growth in Q4, 6.3% in Q1 of 2021, and another 6.7% in Q2. Unemployment, which had leaped to 14.7% in April 2020, was less than half that by December.
Why call that a recession? It was more like a short and sudden shock to the economy – one caused entirely by panicking government officials who thought shutting everything down would “flatten the curve” on the COVID outbreak, despite the lack of any evidence that such lockdowns would work.
It’s a bit ironic that Biden spent years talking up the 2020 shock, calling it an economic “collapse,” “the worst economic crisis since the Great Depression,” one in desperate need of his $2 trillion “rescue plan.”
Now that his “rescue” has turbocharged inflation and produced a recession, Biden wants everyone to think it’s morning in America.
Trying to keep the nation’s spirits up during hard times is a legitimate role of the president. But these days Biden is less like FDR and more like Groucho Marx saying “who are you going to believe, me or your lying eyes?”
By doing so, Biden not only insults the millions who are truly suffering today, he further undermines public confidence, diminishes what little respect people still have for him and other political leaders, and makes it all the harder to right the economic ship.
— Written by the I&I Editorial Board