The White House Can’t Weasel Its Way Out of a Recession

By Kevin D. Williamson

Wednesday, July 27, 2022

 

When is a recession not a recession? When it is bad for Democratic incumbents.

 

From time immemorial, the definition of “recession” in the financial press and the political conversation has been “two or more consecutive quarters of declining real GDP.” The Biden administration, fearing bad news in the near future, is trying to weasel away from that definition. More to the point, it is trying to persuade its friends in the media and in the bureaucracy to do the president’s weaseling for him.

 

“But but but!” come the predictable replies. “What about the National Bureau of Economic Research, huh? They use a different definition!”

 

This is true. The NBER defines a recession subjectively, as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.” You can read a more detailed discussion of that here. The NBER notes that it has at times defined a recession as something other than two consecutive quarters of declining real GDP: “For example, in the case of the February 2020 peak in economic activity, we concluded that the drop in activity had been so great and so widely diffused throughout the economy that the downturn should be classified as a recession even if it proved to be quite brief.”

 

What that example says is not what Biden and his friends want it to say, in that the NBER declared a recession in spite of not having two quarters of tanking GDP — and what the Democrats want is for the NBER to declare that there is no recession despite two straight quarters of tanking GDP (if the numbers do indeed prove to be as bad as expected).

 

You can be sure that if there is real GDP growth of 0.0000000001 percent, the Democrats will snap right back to the two-quarters rule, and declare that there is no recession.

 

What the Biden administration and such slavering Democratic factota as the Center for American Progress are arguing is that we should not consider ourselves in a recession, even if we have two quarters of declining real GDP, because the labor market is so strong. The problem with that line of argument is that the labor market is not very strong — we have low unemployment, true, but we also have declining real wages. “Americans are working more hours for less money” is not a plausible definition of a strong job market. And even with that low unemployment, we haven’t even gotten entirely back to the pre-pandemic number of total jobs.

 

Those declining real incomes are the reason the Biden administration’s “No recession here!” strategy is not only dishonest but genuinely stupid. Ask the average American how the economy is doing and you are not going to get a lecture about real GDP vs. nominal GDP and the distortive effects of quarterly measuring conventions. You are going to get an earful about the cost of gasoline, food, clothes, rented apartments, airfares, and practically everything else. And the Biden administration is not going to talk its way out of Americans’ skyrocketing bills.

 

In fact, the No. 1 item on the NBER’s list of indicators to consider when evaluating whether we are in a recession is “real personal income less transfers.” And when it comes to real income, the patient looks like he’s ready for the electric-cardiac-paddle thingies:

How much fun does that look like?

 

The words cannot be spoken aloud, but surely somebody has advised Joe Biden that he should be praying for a mild recession — because a recession is usually what you get when your anti-inflation policies are working. And while the nominal problem is GDP, the real problem is inflation.