Friday, February 27, 2009

So much for "Worst Economy since the Great Depression"!

At least if you believe projections of the Congressional Budget Office, Federal Reserve, and Obama Administration itself.

No matter how often you hear the phrase "worst since the Great Depression" in the media (10,000 hits via Google News) or from politicians, such as from President Obama himself
By now, it's clear to everyone that we have inherited an economic crisis as deep and dire as any since the days of the Great Depression…
… these numbers say something very different.

The CBO [.pdf] recently projected that even with no economic stimulus, unemployment would peak in 2009 at 9% and the "output gap" (the difference between actual and potential GDP) peak at 7.4%. That's about 20% less than 1982's unemployment rate of 10.8% and output gap of 8.9%.

The Federal Reserve has just projected unemployment peaking at 8.8%, with growth resuming in 2010.

And most optimistically, the Obama Administration's just-released budget projects unemployment at only 8.1% in 2009, and falling thereafter as average 4% growth follows over the four years 2010-2013. (There hasn't been even one year of growth over 3.7% since the 1990s.) Yes, that's starting next year, 2010, with a 3.2% GDP growth, the second-highest rate of the last 10 years!

These numbers would make the current recession worse than 1991, not nearly as bad as 1982, not as bad as 1975 -- none of which were anything like the Great Depression, of course.

So why the endless comparisons of today to the Great Depression by media and politicians alike?

Probably because they benefit by selling things to the public -- advertising and costly political programs respectively -- and "Worse Than 1991 But Not As Bad As 1982" wouldn't sell nearly as effectively. So they, well ... exaggerate.

OK, the media we understand, in the commercial marketplace it is everyone for himself and "caveat emptor".

But aren't we supposed to be able to trust our politicians? Do they not have a responsibility to be informed about the most important issues of our day ... to inform us accordingly ... and to exercise well informed and carefully measured judgment when enacting policy?

Would they really hype catastrophe to get their favored spending programs enacted in a rush, unexamined by the public?

Well, here is House Speaker Nancy Pelosi (after being officially informed by the CBO study mentioned above) warning the public that if the trillion dollar stimulus spending bill isn't enacted immediately Americans will lose 500 million jobs a month.

Anyhow ... at least one can feel better that while last month Obama was saying we're facing the worst economic crisis in 70 years, and so couldn't afford not to enact his trillion dollar stimulus for 2009, this month he's telling us we will be enjoying the boom economy of a generation starting in 2010 -- so sure, we can afford to his budget's planned spending increase of 30% by 2013 while being fiscally stringent.

And don't worry too much about the trillion dollar deficit cost of the stimulus urgently needed for 2010. We'll be able to afford it thanks to 2010's booming economy.