Monday, May 5, 2008

You might be in recession

I've said before that, as far as I can tell, much of the country has been in a recession for some time. Very simply, if 30 million people are doing really, really well, and 270 million people are doing worse and worse, the country (the aggregate United States) may not be in a recession, but the country (the people of the United States) is.

The formal definition may or may not be met (though we rarely truly know that until well after the fact), but the recession is here, and most of us can feel that. It's nice (well, somewhat satisfying) to see Paul Krugman coming around to that.

7 comments:

sbvor said...

Those who rely on their feelings can invent any conditions their emotions care to.

Facts are a different matter. And, the facts say it is increasingly unlikely that we are currently in a recession:
The Recession of 2008 That Wasn’t?

Citizen Carrie said...

We can cherry-pick the facts and statistics all we want, but one key by-product is how people vote during an election time. If people are unhappy with their personal financial situations, recession or not, they will vote their pocket books. They will also be giving their already-elected representatives earfuls about what they think is happening with the economy at townhall meetings.

In other words, if enough people feel we're in a recession, our politicians might start crafting policies as though we really are in a recession. It will then be up to the economists to try to convince Americans the economy is booming and they are personally benefitting from the newly-created wealth.

sbvor said...

Citizen Carrie,

1) I did not “cherry pick” any stats. I reported on precisely what the NBER indicates will normally show “significant decline… lasting more than a few months” during a recession:

"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

And, the NBER is the official arbiter of when recession begin and end.

2) The Leftist policies of Michigan have probably produced a real recession in your state. After all, Michigan has the highest unemployment rate in the country.

The only thing government can do to turn that around is to get out of the way. That won’t happen in Michigan anytime soon. Your best option is to pick a more Conservative state with a lower unemployment rate.

3) No reasonable person would describe the current national economic slowdown as “booming”. However, mercifully, the rest of the nation does not have it as bad as Michigan. And, looking at the entire economy across the entire nation, the hard data which the NBER tells us to look at is indicating it is increasingly unlikely that the nation is currently in a recession:
The Recession of 2008 That Wasn’t?

Citizen Carrie said...

I didn't mean to imply that you personally were cherry-picking the statistics. I'm just saying that anyone can take any statistics they want and run with them.

For example, if you look at a recent report from the Rockefeller Institute of Government which chronicles quarterly tax revenue for states from the period of January to March 2007 - 2008, the Southeast portion of the country looks surprisingly weak compared to that region's reputation for strong economic growth. While Michigan and the Great Lakes states don't look like they're thriving by any means, a person would logically think they would have been worse off than what the report is stating. There are many reasons for this, (e.g., South Carolina dropped their sales tax on certain food items), but this is a case of statistics telling just part of a story.

http://www.rockinst.org/WorkArea/showcontent.aspx?id=14784

As far as whether the country is officially in a recession, it really doesn't matter to most people whether we are or not. I'm only saying that what people are currently feeling matters quite a bit during election time. If the majority of people feel they are not profiting from the economy, a politican would be somewhat unwise to ignore their opinions.

As far as our elected officials in the state of Michigan, I agree that they are disastrously myopic as far as their policies regarding attracting businesses, and their philosphies on job creation and tax structure. A clean sweep would be nice, but party politics being what they are, the people who would be voted in would not be much better. A lot of sane people have already left the state, and believe me, if I wasn't a primary caregiver for several elderly/handicapped people, I probably would have left for warmer climes years ago.

Androcass said...

sbvor:

I think we can quibble endlessly over whether the nation as a whole is in a recession, or any particular state is, or any segment of the population is.

So let's say we call the current situation something else, say a qwerty, a state in which hope of a better life is declining for the majority of the people in this country. Now we can go back and forth as to whether a recession or a qwerty is more damaging to the ideals of America, but at least we're not getting hung up on the technical definition of a recession.

I would argue that a recession measures different things than a qwerty, that higher GDP (you mentioned other measures, but GDP is the one that most people, including economists, focus on) does not have to translate into better lives for any but a few people. At that point, we have some topics for discussion, as you can try to convince me that higher GDP somehow eventually brings about prosperity for all.

On the other hand, I would argue that a qwerty says more about the probability of achieving the American dream. I recognize that I would have to define the qwerty a little more specifically (but not much; the definition of a recession, even the broad one you quote, is remarkably vague). Through careful definition, we might arrive at agreement, though probably not, but at least we would better understand the points we're making.

sbvor said...

Androcass,

1) Words, like "recession" have definitions and it is best to stick to what they mean.

2) In your latest comment, I sense the misguided notion (common among many Dems) that the American dream is fading and the current generation does not have the same opportunities as previous generations.

To lay waste to that falsehood, just look around you at everything you have that your parents did not. You can start with a PC and the internet.

I also sense in your initial post a disillusion with what is most obvious about the Capitalist system (that it produces disparities of wealth). What the media never tell you, least of all, Paul Krugman and The Old York Times, is that, as the disparity grows, all are all lifted up. Any attempt by government to “redistribute” the wealth inevitably drags everybody down. Sure, the gap is reduced. But, the net result is grinding poverty for all. If you’ve never visited a Communist country, do so. There, you will see your idyllic vision of fiscal equality (except, of course, for the Communist Party members who live in luxury).

3) I will grant you that if Americans to not wake up to the ticking time bomb of runaway Entitlements, those far younger than I will, indeed, witness the end of the American Dream. As proof, see the charts and graphs in this post.

4) Finally, this chart really helps to put the current conditions into perspective. Notice that ever since "Reaganomics", recessions have been shorter & less severe & expansions have been longer & better.

To recreate that chart yourself, start here and follow the instructions.

Androcass said...

sbvor:

I appreciate your comment, and see where you're coming from. However, I'm not entirely certain you read my last comment carefully.

1) I understand the definition of "recession" well enough to know that it is quite vague. The definition you cite has terms like "significant," "spread across," "a few," and "normally." Not one of these is well-defined, and there is nothing provided there as guidance when some of the measures listed are positive, others negative.

2) I also know that communism is a far inferior system, but you are creating a false dichotomy and ascribing it to me.

To say that capitalism is not perfect and requires some non-free market mechanisms is not at all the same as saying that we must move to communism.

Additionally, it takes a misreading of the equations of the free market to contend, as you do, that disparity inevitably creates greater wealth for those at the low end (or even in the middle). There is nothing that guarantees that, and one can easily posit a kind of neo-feudalism that is entirely consistent with free market principles.

You and I probably disagree on what the American Dream constitutes, and, until we can define that, I have to assume that your view of it is thriving, mine not so much.

3) I'm not sure I totally disagree with you here, though, again, we might differ to some extent as to what is actually an entitlement.

But I believe there are other factors, already beginning to be realized, that curtail the chance of the American Dream just as much.

4) Again, we likely differ as to what "Reaganomics" means. And there were so many changes going on in our economy during the periods in which recessions were shorter and less severe (and realize that two data points, on one series, unemployment rate, does not constitute proof of anything), it is hard to single out one President's policies, not purely implemented, as definitive.


Finally, I hope you'll read what I wrote a little more carefully. I'm not a "Dem," and I certainly do not depend on the media for my information. In fact, my basic point was that it was unusual to come across something from the NYT that defied conventional wisdom.

Because the biggest problem I have with the media is not their liberal bias, but their inability to report on anything important. Reporters have so little understanding of business or economics that they can easily be led around; the enemy is ignorance, bias I could live with.

Again, I appreciate your stopping by; even if I disagree with you, I should think it sharpens both our arguments to engage in discussion, and I enjoy it.

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