This Is Not Your Father’s Recession: This Is Your Economy on Puberty Blockers
The latest hysteria in DC and the media revolves on whether the United States is currently in a recession, given that real GDP has contracted in consecutive quarters. That has always been the good-enough-for-government-work definition of a recession, but the administration and its media mina birds are saying “ackshually that’s NOT the technical definition of a recession NBER blah blah blah low unemployment blah blah blah.”
So what is it? Well, the dimwitted press secretary and the only slightly more witted head of the National Economic Council, the appalling apparatchik Brian Deese, inform us that the economy is “in transition.” From what to what, they don’t say. Just . . . in transition. So I guess the economy is on puberty blockers or something. Because you know those are a thing now.
This obsessing over terminology brings to mind Jimmy Carter’s Chairman of the Council of Economic Advisors, Alfred E. Kahn. In 1980 Kahn made the mistake of referring to the economy being in depression or recession and he was promptly taken to the woodshed by the political types in the White House. Koch then announced he was foregoing use of those words, and would instead say that the economy was in a banana. After Chiquita (if memory serves) complained, he changed “banana” to “kumquat.”
Kahn was a real economist with a real sense of humor. In other words, totally different that the current crowd of humorless lilliputians.
The parallel with Carter demonstrates one thing though: when an administration freaks out about terminology, it means that they are frantic and desperate and have no substantive case to make. But calling a turd ice cream doesn’t improve the taste.
In fact, the economy’s performance is actually worse than the GDP figures alone would suggest. Instead of underperforming for two quarters, the economy has actually underperformed for three quarters. That’s illustrated in this chart of the shortfall of GDP from potential (as measured by the Fed):
Note that prior to the fourth quarter of 2021, the economy was rebounding sharply from the COVID policy-created collapse. (Not the COVID-created collapse: the COVID policy-created collapse.). The rate of convergence of GDP to potential slowed in the quarter Biden took office, then speeded up for a quarter. By 3Q21, the gap had narrowed to $108 billion, and actual GDP was 99.5 percent of potential. But in the fourth quarter, the gap widened by $169 billion. It widened again by $144 billion in 1Q22, and a further $155 billion in 2Q22.
Based on the trend prior to the fourth quarter of last year, it would have been reasonable to expect that the gap would have been closed by the end of 2021. That would have meant about $108 billion in convergence in the fourth quarter. Adding that $108 billion “shoulda” convergence to the actual divergence of $467 billion gets you to $575 billion in underperformance in the last three quarters.
You can say that this isn’t akshually evidence of a recession, and I really don’t care if you do (because it makes you look like an idiot). You CAN’T say that this doesn’t mean the economy has sucked for 9 months. Nine. Not six.
Oh, and of course, inflation has been raging over that period of time.
How’s that Phillips Curve working out guys? Can you say “stagflation”? Well, you probably won’t say that either, but it’s accurate.
And what is our wonderful government doing in these stagflationary times? Well, experiencing another bout of fiscal diarrhea that resembles a colitis sufferer binging on ExLax.
For starters there is the $52 billion CHIPS act, which is a subsidy boodoggle. There is no economic case whatsoever for it. If computer chips are scarce and prices are high, that provides the right incentive to invest. But the chip industry realizes that Uncle Sucker will crank up the printing machine if they whine loud enough. So they whine “supply chain yadda yadda”, and Uncle Sucker turns the crank.
On deck is the odds-on-favorite for most Orwellian named thing of 2022: “The Inflation Reduction Act of 2022.” More government spending (almost $1 trillion) allegedly paid for with higher taxes (which we know never materialize). Since fiscal excess is the main driver of the recent inflation, this Inflation Reduction Act will increase inflation.
It actually might be better if the government dropped the trillion from helicopters and let us decide where to spend it–then we’d just have the inflationary consequences.
But nooooo. The bill ladles out billions in subsidies for “renewable energy” boondoggles which will raise the true cost of energy because “renewables” are notoriously inefficient. (I put “renewables” in quotes because copper, lithium, cobalt, etc., are not renewable.) And it imposes new levies on efficient fossil fuels like natural gas and coal. Which will raise the cost of energy further.
So deciding where to spend what it shouldn’t be spending at all will harm the economy further.
There’s also some health care fuckery included but I can only take so much so you’re on your own to learn about that.
And of course many Retardicans in Congress, especially in the Senate, are totally on board.
Meaning that Congress and the administration are hell bent on fueling stagflation and making energy more expensive and less efficicient, while arguing over the esoteric meaning of a word pretty much everybody understood just fine before, oh, Monday.
Fiddling while the dollar burns. And you’re the one who will get burned the worst.
What does Wickedpaedia say a recession is? Presumably two consecutive quarters of falling GDP while a Republican is President?
Comment by dearieme — July 30, 2022 @ 6:54 am
‘While serving under Carter, Kahn became known for his blunt and sometimes politically damaging comments. Convinced that certain administration policies would lead to a depression, but having been chided for using the term, he began saying that the economy would “become a banana.” After banana producers objected, he changed his euphemism to “kumquat”. He explained inflation in one press conference by saying “Inflation occurs when everyone is trying to take a piece of the pie, but there isn’t enough pie to go around.” While President Carter tried to downplay the significance of certain economic figures, Kahn called them “a catastrophe.” At one point, a frustrated Kahn offered his resignation, but Carter refused, to which he said “I don’t know why the president doesn’t fire me. Actually, I do. There’s no one else foolish enough to take this job.”
‘He served on many private boards on commissions addressing regulated and deregulating industries such as electricity, telecommunications, and transportation. He also received numerous awards for his work in economics, regulation, and deregulation. A seminar room in the Lincoln Hall Music Library of Cornell University is named in his honor. He also maintained a long relationship with NERA Economic Consulting (formerly National Economic Research Associates).
‘In addition to his professorship at Cornell, Kahn sang baritone in university productions of Gilbert and Sullivan operettas from 1964 until retiring from the stage in 2000; he did a particularly fine turn as the Lord Chancellor in Iolanthe in the early 1970s. He was badly injured in a 2003 car crash and endowed the New York hospital that saved him with funds to set up a camera traffic-surveillance system so emergency-room doctors could view the accidents that injured their patients.
‘Kahn remained completely convinced that deregulating the airlines was a success. When a friend complained that increased numbers of passengers on flights resulted in him sitting next to “a filthy hippie” on a plane, he replied “Since I haven’t heard from the hippie, I can assume the distaste wasn’t reciprocated.” In 2008, the nonagenarian Kahn gave a speech to the Global Airport International Summit in Boston where he said “The industry in the last 30 years gave the public something it had not received before: high quality, space, and low cost. It catered to a variety of demands and abilities today so that we had an enormous spread of fares. It offered the people upgrades such as business class and frequent flyer miles.” Admitting that he was no expert on airplanes or the fine details of the industry, Kahn once said “I can’t tell one plane from the other. To me, they’re all just marginal costs with wings.” ‘
The man was superb.
The regime’s NPCs haven’t edited the ‘bananas’ para out of his bio because, I have no doubt, they are completely oblivious to it.
Anyway: for the first time, I can say I am completely unsurprised by this display of idiocy – perhaps I’ve reached ‘peak cynicism’.
Comment by Ex-Global Super-Regulator on Lunch Break — July 30, 2022 @ 8:22 pm
“Fiddling while the dollar burns. And you’re the one who will get burned the worst.”
Debauching the currency … shouldn’t it be more fun? You know, like when Bacchus throws a party … https://cdn.britannica.com/91/95791-050-BE17820E/Triumph-Bacchus-oil-canvas-Ciro-Ferri.jpg
Comment by Simple Simon — July 31, 2022 @ 10:53 am
Maybe you’re right about something (3, not 2, “as illustrated in this chart”), but your screed makes Krugman sound like the voice of reason.
Comment by Tim Abendroth — July 31, 2022 @ 9:12 pm
Sit tight we are getting closer to the massive five decade old corruption exposure, followed by mass resignations and a caretaker government.
No shots fired, no civil war.
Thank you local sheriff’s department.
Comment by Joe Walker — August 1, 2022 @ 2:13 pm
From a British perspective these are eye watering expenditures. Even knocking off a zero at the end would lead to a bank run and bond collapse in UK.
I guess that’s what the “inordinate privilege” of being the world’s reserve currency allows you.
From my perspective it looks like robbers looting the store before the cops arrive. Bring on the mid terms, please.
Comment by philip — August 2, 2022 @ 4:59 pm
@ philip: “I guess that’s what the “inordinate privilege” of being the world’s reserve currency allows you.”
It does in the era of that currency being a fiat currency. Would it if the reserve currency were linked to gold? (Or platinum, or ambergris, or …?)
Comment by dearieme — August 2, 2022 @ 5:41 pm
@Tim. GFY. And thank you for playing.
Comment by cpirrong — August 7, 2022 @ 4:36 pm