Archive for January, 2009

Economic Hyperbole & Reality

January 25, 2009

Like the old saw about economists correctly predicting 10 of the last 5 recessions, journalists deserve equal endorsement for their proclivity to declare each recession “the worst since the Great Depression.” Such hyperbole typically evinces a woeful ignorance of history.

That’s not to deny that we find ourselves in difficult economic straits. Our present situation – globally, not just in the United States – is justly of grave concern. But the Kiplinger Letter of January 16th described our current challenges more accurately than either the Cassandras or the Panglossians:

“For a parallel to the challenges Obama faces as he assumes office . . . You don’t have to look as far back as FDR and the Great Depression. Most presidents of the past 60 years have taken the oath amid varying degrees of economic stress. Though the present situation may turn out to be more dire than what other presidents faced, their crises were very real at the time.

“Truman had to guide the nation from a wartime to a peacetime economy, shifting from strict controls to a free market. The transition didn’t go smoothly.

“Ford and Carter were dogged by problems mostly not of their own making but spurred by a 600% hike in the global price of petroleum from 1973 to 1980.

“The presidents Bush, father and son, took office at the end of expansions that eventually collapsed of their own weight in late-stage speculative excesses. Both suffered hangovers. What’s more, both had the misfortune of presiding over recessions when international crises further weakened the US economy.

“Reagan faced an economic crisis most similar in magnitude to today’s. Unemployment was a nasty 7% and climbing fast. Inflation had been running at 12.5%. Interest rates in the high teens crippled residential real estate and business investment. The stock market had been in a rut since 1966.

“The cost of the cure was high. The Fed tightened the screws on credit, pushing the economy into the worst recession since the 1930s. Despite stimulus from deep cuts in tax rates and a military buildup, output took a nosedive . . . Tax receipts fell but not spending, producing a modern record deficit . . . 6% of GDP.

“In short, Reagan inherited a sick economy that worsened before recovering. But recovery did come . . . in the middle of his first term . . . and voters credited Reagan with playing a key role in bringing it about, gratefully reelecting him in 1984.

“Obama will likely experience something similar with this difficult economy, which will probably worsen before growth resumes. Today’s unemployment rate of about 7% will hit at least 9% and may approach the double-digit peak of 1982. The contraction will probably bottom out by midyear, but the ensuing growth will be weak for another year or so. As tax receipts again plunge and costs zoom, Reagan’s record federal deficit will be eclipsed, topping $1 trillion . . . 7% of GDP. . . .

“Obama will be judged on how well the economy is nursed back to health by the White House, Congress, the Fed and American business leadership.

“This will take time, but all recessions eventually end.”

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The Joshua Generation

January 19, 2009

Yesterday’s New York Times includes this brief essay Demographics and Destiny by Robert S. Boynton, a review of Gwen Ifill’s new book The Breakthrough: Politics and Race in the Age of Obama.

A Trip to the Library of Congress

January 17, 2009

Charles McGrath tours the Library of Congress. And, of course, you can, too.