The White House has been challenging a commonly-used definition of “recession” in advance of economic data coming out Thursday, but one economist took the air out of the administration’s argument with a single graph.
Biden administration officials, including Treasury Secretary Janet Yellen and economic adviser Brian Deese, have argued that even if second quarter GDP data scheduled to be released Thursday show negative growth for a second successive quarter, the economy is still not in a recession. Back-to-back quarters of negative growth is what many people think of as the definition of “recession,” and indeed is included in Google’s definition.
Michael Strain, resident scholar and director of economic policy studies at the American Enterprise Institute (AEI) took to Twitter to point out that each of the past ten times the economy has experienced two consecutive quarters of negative growth, a recession has, in fact, ultimately been declared.
Question: Out of the past 10 times the U.S. economy has experienced two consecutive quarters of negative economic growth, how many times was a recession officially declared?
Answer: 10. pic.twitter.com/yrR1kwlC4r
— Michael R. Strain (@MichaelRStrain) July 25, 2022
Officially, the National Bureau of Economic Research (NBER) makes the determination of when the economy is in a recession, and does so by looking broadly at many different factors to determine if there has been “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” rather than just if there have been two quarters of negative growth, according to the Federal Reserve Bank of San Francisco.
But, as Strain points out, two consecutive quarters of contraction have historically been incredibly reliable as a correlate of recessions.
Live shot of the media this week trying to change the definition of the word “recession”. pic.twitter.com/qUzDXcCjlY
— Wall Street Silver (@WallStreetSilv) July 24, 2022
Echoing Strain’s point, E.J. Antoni, research fellow for regional economics at The Heritage Foundation, told the Daily Caller News Foundation that this pattern of reliability for the indicator in fact goes back as far as the end of World War Two.
“I dug into the data and this goes back a long, long time. Every time there have been two quarters of contraction in the post-war period there’s been a recession,” Antoni told the DCNF. (RELATED: Wall Street Is Freaking Out About One Major Recession Indicator)
Good morning to everybody except the White House for attempting to gaslight us about being in a recession
— Ashley St. Clair (@stclairashley) July 25, 2022
The White House did not respond to the Daily Caller News Foundation’s request for comment.
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