Economic insight and analysis from The Wall Street Journal.
February 13, 2009,
Amid Complaints, Stimulus May Benefit From Speed
For all the complaints about what the economics stimulus plan that just passed the House will or won’t do, AllianceBernstein economist Joseph Carson says that many people are missing one important point — how quickly the bill is pushing its way toward President Obama’s desk.
“Both Ronald Reagan and Bill Clinton were elected with a strong mandate for change and each launched major fiscal initiatives during their first year in office,” he wrote in a note to clients. “In 1981, Reagan proposed a major tax reduction plan while in 1993, Clinton proposed major deficit reduction legislation. In both cases, it took eight months of negotiations with Congress before both pieces of legislation were passed and enacted into law.”
The speed of the plan raises the chances that more stimulus funds will be hitting the economy this year — he thinks they’ll amount to 2.5% of 2009 gross domestic product. That raises the chances of the economy recovering in the second half of this year.
How Do You Define Depression?
Jobs are disappearing at an alarming pace, income growth is stalling, home values are still tumbling and the stock market is down more than 40% from its peak.
How would you describe the economy right now?
(That’s what you say if you’re a policy maker and don’t want to frighten the public even more.)
(You certainly could’ve said that starting in August 2007, if not before.)
C. In Recession
(That was clear by early 2008 and confirmed a few months ago. Thank you, NBER.)
D. In Depression
Almost a third of Americans are now choosing option D. The latest survey by the Pew Research Center, conducted February 4-8, found 30% of the public saying the nation is “in depression,” up from 22% in October. About 57% say we’re in recession. Overall, 95% say the economy is “only fair/poor” while 4% somehow still think the economy is “excellent/good,” down from 10% last July and 9% in October. (You can read the poll results here. Among other results, it found job worries moving up the income ladder: Only 34% of people with family incomes of $100,000 or more say they expect the economy to be better a year from now, down 22 points from early October.)
Lacking an official definition of depression, some policy makers — particularly those calling for urgent action — have labeled the downturn a “depression.” Even the International Monetary Fund chief just used it, though White House officials distance themselves from the notion that we’re in a depression.
The public’s framework for something worse than a deep recession is really just the Great Depression, when unemployment hit 25%. It was 7.6% under the official rate in January or 13.9% under the broader measure. Even under the old semi-funny shorthand definition — a recession is when your neighbor loses his job, a depression is when you lose yours — it may be surprising to see almost a third of the country calling this a depression.
The U.S. is now in the 15th month of recession, according to the National Bureau of Economic Research’s timeline. If the contraction continues through the second quarter, as it likely will, we will have easily surpassed the longest recession — 16 months — since World War II.
So how should we define a depression? - Sudeep Reddy