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Obama says we are in a recession. Does he know what a recession is?
A recession is officially define as negative GDP growth in 2 quarters or more.
Since we have had no such scenario this year, we are not in a recession. But Barack Obama seems to have his own definition. If so, I hereby ask him to give us the details.
AP reports today:
Barack Obama said Saturday there is “little doubt we've moved into recession,” underscoring the country's need for a second economic stimulus package, swift steps to shore up the housing market and a long-term energy policy to reduce reliance on foreign oil imports.
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Comments (27)
There are two Americas. Billionaires and "the rest of us".
"The rest of us" is in a recession/economic downturn.
Go into a neighborhood where people have lost their jobs and can't afford their mortgages and scream into a megaphone:
"Folks, technically, we're not in a recession!!" "I repeat, technically, we're not in a recession!!"
Let us know how if you come out alive.
July 13, 2008 3:25 PM | Reply | Permalink
I believe he does know the definition of recession.
I believe he also knows how to parse a simple English-language sentence.
Re-read, Andrew.
July 13, 2008 3:31 PM | Reply | Permalink
If he knows the definition of a recession, why did he say we are in one, when we have not had two consecutive months of negative GDP growth?
July 13, 2008 4:58 PM | Reply | Permalink
When do you "move into recession?"
When the economy starts to shrink, or when you have two quarters of data showing that the economy has been steadily shrinking?
I seem to recall (it might have been 2001, but possibly earlier) reading a news article to this effect:
"Guess what, folks?
"After examining final figures, we were in an actual recession and nobody called it. But it's OK; we're out of it now."
That recession goes into the economic ledger as lasting from when GDP first fell to when it picked up again, not from when it was belatedly recognized.
Could Obama be wrong?
Absolutely. The U.S. has managed to squeak by without an actual quarter in negative digits, so in theory he could be spectacularly wrong.
But GDP figures are just one aspect of a country's economic fundamentals.
The dollar value of exports, for example, is propped up by the fact it's weakening against other currencies.
Not so good in the long term.
Obama is right to issue the alarm; the economy can't afford another half-year of temporizing.
July 13, 2008 7:19 PM | Reply | Permalink
Andrew Perzez is not in a Mental Recession. He has always been this dumb!
July 13, 2008 3:39 PM | Reply | Permalink
Thanks, Andrew Perez. Do you know what the definition of a Depression is? You parroting Phil Gramm until John McCain actually wins the opportunity to exceed your own stupidity.
July 13, 2008 3:48 PM | Reply | Permalink
Thanks, Andrew Perez. Do you know what the definition of a Depression is?
What does Depression have to do with our argument?
July 13, 2008 4:59 PM | Reply | Permalink
There is no such thing as a non-technical definition of a recession. You are describing a bad, or very bad economy.
Fine, we can't deny that the economy sucks. But a recession is what it is, and its meaning cannot be changed.
Very bad economy does not necessarily equate "recession."
July 13, 2008 5:03 PM | Reply | Permalink
Dude. Do you have God's own first clue about economics? Saying things like, "There is no such thing as a non-technical definition of a recession." This is like "there's no such thing as a non-technical definition of fire." Or "Brains."
I play an economist in real life. And - hate to break the news - there were economies and they went up & down LONG before economists invented GDP, or started arguing over how to measure things like "recessions." Some of 'em TRIED to find "technical" measurements to describe the real world thing - like the two quarters things (not two months) - but it's STILL argued about. Why? Because - as acanuck points out - the numbers are always in motion, data gets corrected, whole recessions have been MISSED by certain measurements.
Here. Let's just throw one other variable in. Inflation. We try to measure by using tools like CPI. However, it's been turned into the equivalent of meatloaf for economists who actually need a precise tool to do the job. If CPI is off even by a single percent, that "technical definition of a recession" that you're so proud of us missing, turns out to have been.... a recession.
Don't be killin' electrons for no reason. Remember the passenger pigeon. Some day we may wish we had these electrons back.
I know I do. Already.
July 13, 2008 11:02 PM | Reply | Permalink
Obama thinks there is "little doubt we've moved into recession" and the economy is shrinking now.
Economists will need half a year of data to confirm that, but he's suggesting we can't wait to act.
Not that he has much margin to maneuver.
The current administration has tried tax cuts, stimulus rebates, interest-rate tinkering.
But jobs are still vanishing, and soaring energy costs (and as a result, food costs) are only starting to work their full inflationary effect into the system.
People rightly worry about the strategic and military fallout from an attack on Iran, but the immediate effect would be felt much closer to home: a deep, long-term recession that won't see a cyclical resolution.
It's troubling that the McCain camp thinks the recession is all in people's minds, and even more so that he thinks his foreign policy options are cost-free.
July 13, 2008 5:20 PM | Reply | Permalink
The economy is not shrinking now, it is expanding at a slow pace. There is a difference. GDP for the 1st quarter was 1%, Q2 looks like it will be 2%. Still under the 3+% you would like, but NOT a recession. No doubt energy costs are a negative factor, also the effect on food prices caused by the ethanol production increase is a negative factor. But there is also a crisis of confidence, that is caused by media speculation about recessions and by thoughtless politicians like Schumer who start runs on banks like IndyMac with a stupid letter.
July 13, 2008 6:52 PM | Reply | Permalink
Two per cent GDP growth sounds optimistic, but let's say that's right.
Even if oil doesn't double again over the next year, energy costs are on track to drive the official 4% inflation rate through the roof.
People are already opting for food over new cars, improved homes and discretionary travel.
And what does soaring inflation (some predict double digits) do to interest rates? They have to go up, and the housing crisis deepens.
Job losses there spill over into other, already hurting sectors.
If the recession hasn't begun, it's in the cards that have already been dealt.
I'm painting a bleak picture, but my point is that the crisis in confidence is not psychological or imaginary, but simple realism.
Even though I think Obama has a far better grasp of the economic dangers than his Republican rival, I don't envy him the task he is taking on.
He could end up being a one-term president, simply because of the enormity of the economic challenges he faces.
July 13, 2008 8:07 PM | Reply | Permalink
How many times must you pick at a nit in Obama's eye while neglecting the logjam in McCain's myopic vision of America? Get off the fence and have the balls to actually SUPPORT a candidate instead of playing equal opportunity critic to both. The rest of us don't have the luxury of sitting on the sidelines while alternately cheering McCain to a win.
July 13, 2008 6:16 PM | Reply | Permalink
Has anyone see the New Yorker cover...Jesus ffing christ what in the hell were they thinking? This is bad, mean real bad.
July 13, 2008 7:37 PM | Reply | Permalink
Sure, you may question Obama's judgement about a recession, but do you also question the most successful and respected investors in America, Warren Buffett as well?
http://www.msnbc.msn.com/id/24829600/
Someone who knows a thing or two about economics -- also knows that it is not so black and white cut and dry.
July 13, 2008 10:10 PM | Reply | Permalink
Gotta love the Repubs that want to insist on the classic definition of a recession. Which really doesn't matter. They are just words. What matters is that you can buy houses in downtown cleveland ohio in foreclosure for 2-4000 dollars. Not just one house, and not just one neighborhood.......Call of it what you want to but we are near the abyss..
July 13, 2008 10:23 PM | Reply | Permalink
I propose a new definition:
Fucked. The economy is fucked. Being "fucked" is defined as having two or more major financial institutions going under and needing bailouts.
There, now next time Obama talks about the economy, he can say that we're fucked.
July 14, 2008 1:16 AM | Reply | Permalink
This post is not recommended. Your comment, however, is.
July 14, 2008 1:21 AM | Reply | Permalink
Yup. I'm with the bunny here. Best definition of our present state yet. The Customer - TPM's #1 Economist. All bow.
July 14, 2008 1:27 AM | Reply | Permalink
Monster speak big truth!
July 14, 2008 10:07 AM | Reply | Permalink
When you see horns over the hill, you know there's a bull.
Are you kidding? We're in a freakin' recession, and Obama isn't the only one saying so.
July 14, 2008 1:18 AM | Reply | Permalink
the nation as a whole as of now does not appear to be in a recession.. however as you go further in time the numbers get tweaked and we may in fact be in one and not know it yet.
parts of the country are in a recession.. some states are.. some states aren't
what you end up with is a very slow economy.. less than 1% growth.
Manhattan or San Francisco for example are not in a recession
but parts of Michigan and Ohio are definately.
in FL you have some areas that home prices are dropping like a rock.. and you have other areas that homes prices are actually rising.
just depends.
July 14, 2008 9:12 AM | Reply | Permalink
The 2 quarter rule is not the one most economists use officially. It is a simple rule of thumb. The NBER says when we are in recession and it is not simple and uses a lot of factors and judgement. But they may not say we are in recession until we are well in it and maybe almost out.
One worry is that with the subjective element they are not immune to a conservative (read republican) bias in the declarations.
But the real issue is there are alot of people really hurting and whether it is official or not is irrelevant. Ask those who have lost 20% of their IRA or 401 k, or 100% of their home equity.
July 14, 2008 11:34 AM | Reply | Permalink
For another look at the "technical-doesn't-necessarily-mean-cute-and-dried" point of view, I'd recommend this Economist article from March:
http://www.economist.com/finance/displaystory.cfm?story_id=10852462
Keep in mind that with these "technical" definitions, we are building them based on aggregate numbers that are defined by those who assemble figures like GDP, CPI, and PPI. I for one am not fully convinced that the figures aren't to some degree willfully distorted. And I'm also persuaded by the Economist's argument that GDP per capita is perhaps more relevant than outright GDP, which means that the statistical recession has, in fact, already begun.
July 14, 2008 12:26 PM | Reply | Permalink
Even McCain agrees we are in a recession, so what's your point, other than junior-high-school definition-mongering?
July 14, 2008 1:08 PM | Reply | Permalink
Democracies work in the open for a reason.
IndyMac tanked because conditions for financial institutions aren't good in general. Schumer made available information that investors should have been made aware of already.
Poor financial conditions is especially not a condition for officials to kick into stealth mode and do things in secret. For one thing, doing that spooks Wall Street, which can't invest properly if information is not provided in timely fashion. Indeed, if someone discovers that you willfully witheld information they needed in order to manage their finances properly, they can sue you.
A much, much worse situation exists with respect to Fannie Mae and Freddie Mac; either of these two organizations dwarf IndyMac. When they run into problems, you had better address the problem. You can't possibly hide something like that, a lot of people's money are involved, all of those people are entitled to whatever information is relevant.
July 14, 2008 1:25 PM | Reply | Permalink
Bloomberg today quotes author and investor Jim Rogers as saying the U.S. economy is in a recession, possibly the worst since World War II.
"They're ruining what has been one of the greatest economies in the world," Rogers said. Bernanke and Paulson "are bailing out their friends on Wall Street but there are 300 million Americans that are going to have to pay for this."
July 14, 2008 2:25 PM | Reply | Permalink
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