The 'Recession' Is a Media Myth.

Fox News ^ | April 1, 2008 | John Lott

[garyhope]

The 'Recession' Is a Media Myth Tuesday, April 01, 2008

By John R. Lott, Jr.

E-Mail Respond Print Share: DiggFacebookStumbleUpon During the 2000 election, with Bill Clinton as president, the economy was viewed through rose-colored glasses. According to polls, voters didn’t realize that the country was in a recession. Although the economy started shrinking in July 2000, most Americans through the entire year thought that the economy was fine.

But over the last half-year, the media and politicians have said we were in a recession even while the economy was still growing.

Gas prices are going up. The economy is slowing. Talk of recession is seemingly everywhere. While the majority of people rate their personal finances positively, consumer confidence in the economy has plunged to a 16-year low, well below what it was during the last year of the Clinton administration when we were in a recession.

[Ken H]

My blind friends all believe it even though one of them just bought his 18 yr old son a very nice 2007, fully loaded, $25,000 Chevy Silverado.

Hopefully, dad won't be driving it!

[JLS]

The NBER “calls” recessions. They are not necessarily unbiased. They are people from mostly “fancy” Eastern schools.

In 2000-2001 according to the BEA:

http://www.bea.gov/national/xls/gdpchg.xls

there were 3 quarters during which real GDP fell. They were 2000:Q3, 2001:Q1 and 2001:Q3. Notice no two were consecutive. If based on this data one were to call a recession, it is a matter of opinion whether it began in 2000:Q3 or 2001:Q1. The quarterly growth rates from 2000:Q2 to 2002:Q2 consectutively were, 6.4, -0.5, 2.1, -0.5, 1.2, -1.4, 1.6, 2.7. To argue that the first quarter with negative growth was not in that recession is a bit strange, wouldn’t you say?

And Lott’s point is pretty well taken, as yet we have not had a quarter of negative growth during this election cycle. Maybe we will this quarter, maybe not. But there has been a lot of recession talk to not yet have a quarter of negative growth. And he compares that to the lack of recession talk during a quarter of negative growth headiing up to the 2000 election.

[Ken H]

Maybe I won't lay off my man servant after all.

Such stories touch my heart. Were things actually looking THAT bad?

[JLS]

Yet, as any economist knows, a recession is two consecutive quarters of negative growth

Sorry but most economist know a recession in the US is when the NBER [National Bureau of Economic Research] calls a recession. The two consectutive quarters is a rule of thumb popularized by principles of economics textbooks.

[Nathan Zachary]

The inflation we are seeing is a result of mainly ONE thing. The high cost of oil. Yet we hear from media it being blamed on everything BUT. Our entire economy is based on oil. It goes up, everything MUST follow sooner or later. AAs far as this mortgage thing, if you were to believe media, the entire population of the USA bought a house in the last couple years and is defaulting on their mortgages.

The real problem is that banks took all the gravy then passed (sold) all the high risk off to others, which unsuspecting people unaware of the swindle going on invested money in these companies.

The banks are laughing, they made off like thieves, while the government is bailing out these trust companies etc. holding all this bad debt, which isn't all defaulted loans, but has a high risk to be.

Just once however, I would like to hear how many people actually bought houses with high risk loans during this period, I million? 2 Million? Certainly it isn't a very large percentage of the population. if even a single percent.

Before BILLIONS of MY and YOUR money are tossed away, I demand to know what the real figure is, and not have our money used to bail out other bad loans made to fake entities set up by rich Democrat elites like Soros.

I would also like to see regulations preventing banks and other lending companies from pulling a swindle like this again and ducking out on their share of the bad loan burden.

[Billthedrill]

Maybe I won't lay off my man servant after all.

Good heavens, no! Uh...look, this is kinda public, but two words: "Organ farming." Say no more.

[Mark]

The peanut butter and grape jelly samwhiches keeps him employed.

[JLS]

There is no reason to sit here and belabor the point. The National Bureau of Economic Research (NBER) is THE authority on recessions. Arguing against what they say is like arguing with Einstein that he cannot spell his own name because you know the 'i before e except after c' rule and he got it wrong in his own name twice.

Hardly. The NBER make the call, really A call. A recession is not really a very precise term. Their call is an opinion. The MSM give much weight to their opinion. I don't give that much weight to the MSM. I am a profession economist and as I said above the NBER is not without its own biases.

They made the strange call to call a recession in 2001 but leave out the first quarter of negative growth. That is very odd to me. But of course they mostly work in fancy Eastern schools or in DC where the GOP is not popular. Given the chance to call this an inherited recession or say it is Bush's fault, they chose the latter. That does not make there opinion the only one. Lott apparently has a different one. He may have his own biases.

[manx]

Funny how everyone starts talking about recession and the down fall of the U.S. economy right before an election when democrats are feeling most desperate to get the Republicans out of the White House. I keep telling my wife that we should wait until after the election before we start worrying about all of this negative talk. I imagine things will suddenly start getting better.

[Nathan Zachary]

As long as you have a diverse portfolio you don't have much to worry about.

If you have a lot of metal, Jewelry making is a good hobby...

[HawaiianGecko]

 "And Lott’s point is pretty well taken, as yet we have not had a quarter of negative growth during this election cycle."

I agree with that statement.  I also agree with the general point Lott is trying to make.  I just don't think he needs to revise history and claim a recession in 2000 when there was not.

Direct from the pages of the BEA:  link   

In general usage, the word recession connotes a marked slippage in economic activity. While gross domestic product (GDP) is the broadest measure of economic activity, the often-cited identification of a recession with two consecutive quarters of negative GDP growth is not an official designation. The designation of a recession is the province of a committee of experts at the National Bureau of Economic Research (NBER), a private non-profit research organization that focuses on understanding the U.S. economy.

Since you are relying upon data from the BEA and they rely upon the NBER, is there a conclusion to be reached here?  I cannot match your knowledge of this subject as you are a professional economist living and breathing this type of information while I am not, but I'm also not fully illiterate, do have post graduate degrees and can read.  It seems to me that the reason an entity such as NBER has it's provenance is precisely so one has somewhere to look for answers.  Whether they are East coast, West coast, ivy league or hillbilly doesn't matter as long as they are consistent and I know their bias. Personally I think they exist to keep bloggers from revising history.

I just don't want to wind up on Jeopardy some day and miss that econ daily double about the 2000 recession simply because an article from John Lott, Jr. stuck in my mind. 

I also agree with your eyebrows rising over the strangeness of 1st qtr 2001 negative growth not being mentioned.  However, I had a multi-day debate with my son's room mate in the summer of 2002 over this very subject and the data at the time didn't reflect Q1-2001 being negative.  I'm sure that is a revision as I may not remember the exact numbers, but I certainly would have remembered a negative quarter as it would have simply killed my argument.

[IrishCatholic]

bookmark.

[JLS]

Since you are relying upon data from the BEA and they rely upon the NBER, is there a conclusion to be reached here?

I took notice of Lott's non-NBER recession dates too. I might have just pointed them out had other not already done so.

The NBER is just a group of people offering an opinion. I am sure the original idea was to have a non-partisan group end arguments between the administration and the party not in the White House on when we had a recession. In much of the past it was not that big a deal. Recessions or contraction were deep and long enough to leave little room for argument. Fortunately we have made progress in stabilizing the economy, but that leads to argument about was there a recession in periods like 2000-2001 or not.

Of course at one time the MSM prided themselves in objectivity. They have thrown that out the window. At one time American universities were proud not to be politicized like say those in South America, but alas that to is out the window. To me that means products of the academy like the NBER calls of recession are now more suspect than in the past. The people at the NBER live in an environment where they will be pestered less and treated better if they dont call a recession as having started in during the last half year of the Clinton administration. Economists study and believe people follow incentive and the NBER maybe was in this case. The NBER may have taken a baby step on that slippery slope that the MSM and much of the academy have slid well down before them. For the sake of my profession, I hope they correct this and maybe even go back and revise the dates of that recession.

I cannot match your knowledge of this subject as you are a professional economist living and breathing this type of information while I am not, but I'm also not fully illiterate, do have post graduate degrees and can read. It seems to me that the reason an entity such as NBER has it's provenance is precisely so one has somewhere to look for answers. Whether they are East coast, West coast, ivy league or hillbilly doesn't matter as long as they are consistent and I know their bias. Personally I think they exist to keep bloggers from revising history.

If I have an advantage in this, it is that I know everyone involved is just a person offering an opinion. John Lott is just a guy who was an attendee at two week seminar I once went to. The guys at the NBER are just guys too. They are just other people who went to grad school and became professional economist. [Heck I was once in a session at some economics meetings and in late wanders Milton Friedman who sat in the seat behind me, listen to a paper and left.] So I recognize they made a call and I recognize that Lott is differing with them as is his right. The data suggest neither can claim the other is completely all wet on their call.

I just don't want to wind up on Jeopardy some day and miss that econ daily double about the 2000 recession simply because an article from John Lott, Jr. stuck in my mind.

Alas the correct answer on Jeopardy is always the standard answer. So if the answer is He was the worst dictator of the 20th Century and they want Who was Adolph Hitler, it is does not matter if you or I or John Lott thinks it was Mao or Stalin. Sometime you can be more informed than Jeopardy or Trivial Pursuit, ie Althea Gibson.

I also agree with your eyebrows rising over the strangeness of 1st qtr 2001 negative growth not being mentioned. However, I had a multi-day debate with my son's room mate in the summer of 2002 over this very subject and the data at the time didn't reflect Q1-2001 being negative. I'm sure that is a revision as I may not remember the exact numbers, but I certainly would have remembered a negative quarter as it would have simply killed my argument.

As you know, there are revisions to the GDP growth data. I did check and find a contemporaneous source showing no negative GDP until 2001:Q3, 2000:Q3 and 2001:Q1 must be due to revisions. I wonder what will happen to the 0.6 percent from the 2007:Q4? BTW, in 2007:Q1 also came in at 0.6, yet 2007:Q2 and 2007:Q3 were strong growth quarters.

[1035rep]

Bookmark

[malia]

to read later bump

[familyop]

"So, the price of oil is controled by our economic situation? I think not. The price of oil is controled by greedy traders and the Saudi's who keep the supplies tight in order to keep oil as high as possible."

I agree, except that oil producing nations can't produce much more than they are now without poking more holes into the same fields or finding new ones. They don't want to suck all of their power out of the ground more quickly than they already are. Countries like China and India must buy more oil each year in order to continue increasing their production to meet increasing domestic demand and demand from other trading partners.

"The dollar is down for several reasons, including attempts from our enemies- which include traitors living in this nation- to drive it down on the trading floor, and unhinge it from being the worlds dollar standard for trade in gold and oil and all other currencies."

The dollar is going down, mainly because our trading partners' have more domestic consumption and other trading partners. As their prices go up due to the increasing demand, more dollars are required to buy their products. Such currency balancing is one of the inevitable trends of a global economy.

As for the "media," sponsors decide as to what is disseminated as "news."

[familyop]

"So, the price of oil is controled by our economic situation?"

And BTW, I stated the opposite. Import-interest media have been harping that their "recession" would bring oil prices down. I was commenting that it hasn't happened. Freight fuel will only go up in the long run, as the dollar goes down.

We need to learn a few lessons quickly and strengthen our Nation again by increasing domestic manufacturing and employing the fathers of our future soldiers. We also don't need to be educating and employing so many foreign engineers who later build weapons against us in adversarial nations.

[conservatism_IS_compassion]

there are revisions to the GDP growth data. I did check and find a contemporaneous source showing no negative GDP until 2001:Q3, 2000:Q3 and 2001:Q1 must be due to revisions.

I clearly recall that some "rosy scenario" numbers came out of the Clinton Commerce Department in mid-2000 which got revised downward after the election, if not before.

[AndyTheBear]

Lott is wrong.

Granted a recession is two consecutive quarters of negative growth.

Granted that there have been no quarters of negative growth.

You see, big oil man George W Bush gave the Earth a fever with his callous disregard for the dangers of CO2. And the Earth's fever is inflating the GDP readings, and thus obscuring the fact that there is a recession. Obviously it was Karl Rove's idea to pump up the CO2 to obscure the bad economy...but the American people can see through this ruse.

So we are still in a recession because everybody says so. Heck it might even be a depression.</satire>

[Uncle Chip]

Propagation of the myth that we are in a Recession has been done in order to justify the lowering of interest rates in order to pump up the stock market for the big financial interests in New York, and the bottomlines of banks.