What is a recession?
Facing the dictionary definition of a recession, President Biden tries to change it
What is a recession? Most people, even those whose last economics class was in high school, were taught that it's when the economy has two consecutive quarters of negative growth.
The U.S. Bureau of Economic Analysis didn’t call it a recession, on Thursday, when it dropped the new quarterly economic data. It just shared the numbers. And the numbers showed negative growth in America’s Gross Domestic Product in the first and second quarter of 2022: -1.6% in the first quarter, -0.9% in the second.
Presidents, when facing that a consecutive negative quarter, don’t like to be saddled with that word, recession. President Joe Biden is no different. His team has argued there’s more to the definition than the one we’ve known for decades.
On “Meet The Press,” Treasury Secretary Janet Yellen conceded the economy is, as she put it, “slowing down.” But don’t call it a recession, Yellen said.
“A recession is a broad-based contraction that affects many sectors of the economy. We just don't have that,” Yellen said.
The Wall Street Journal, a financial newspaper based in New York, says, “There is no precise definition of recession.”
Even the users of Wikipedia, “The Free Encyclopedia,” have gotten in on the game. One Twitter user found that the Wikipedia entry “Recession” had been edited 38 times in a recent three-day period.
Efforts, official and unofficial, are afoot to move the goalposts and define away a recession.
“I consider this spin doctoring at its finest, but the Biden administration is not the only administration that wants to avoid the ‘R-word,’” said Michael LaFaive, the senior director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy. “Politicians know that their own job is inextricably linked to other people’s jobs and the economic well-being of their voters.”
LaFaive told CapCon he views two consecutive quarters of negative growth as a “red flag” of trouble, but he added that the official declaration of a recession won’t be made until much later, retroactively, by the National Bureau of Economic Research. That could come a year from now, he noted.
“They take their time to make sure they get the call right,” LaFaive said.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.