By HARRIET ALEXANDER,
- Phillip Magness, the research and education director at the American Institute for Economic Research, believes the U.S. is in a recession
- Economists usually say it is a recession when two successive quarters have seen negative growth: data on Thursday showed the definition had been met
- The White House is instead relying on an ‘official declaration’ from the the National Bureau of Economic Research (NBER), which can be very slow
- Magness’s post on Facebook about the U.S. being in a recession was fact-checked by Facebook and a warning posted online
- ‘We live in an Orwellian hell-scape,’ he tweeted. ‘Facebook is now ‘fact checking’ anyone who questions the White House’s word-games’
Two consecutive quarters of negative growth is the standard definition of a recession, and Phillip Magness, the research and education director at the American Institute for Economic Research, posted on Facebook a commentary about the country now being in a recession.
The post – which is no longer visible – was marked by Facebook’s fact checkers as being misleading.
‘We live in an Orwellian hell-scape,’ he tweeted.
‘Facebook is now ‘fact checking’ anyone who questions the White House’s word-games about the definition of a recession.’
Biden on Thursday (pictured) insisted that the country was not in a recession, despite new data showing a second consecutive quarter with negative growth
Phillip Magness, an economic historian, believes the U.S. is in recession – but the White House disagrees
Magness then tweeted, as the row continued: ‘Recession. n. 1. 2 consecutive quarters of negative GDP growth when the media dislikes the president. 2. A vague, holistic, ill-defined condition that you aren’t allowed to talk about until the NBER makes a determination a year from now, provided the media likes the president.’
The long-rumbling dispute was given fresh impetus by a White House fact sheet, issued on July 21, in which they said the determination of whether there was a recession or not was ‘holistic’.
‘What is a recession? While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle,’ the White House said.
‘Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data—including the labor market, consumer and business spending, industrial production, and incomes.
‘Based on these data, it is unlikely that the decline in GDP in the first quarter of this year—even if followed by another GDP decline in the second quarter—indicates a recession.’
Biden, seen on Thursday, insists that the country is not in a recession
The White House in this July 21 fact sheet said the U.S. was not in a recession
Magness explained in an op ed in The Wall Street Journal on July 27, entitled: ‘A Recession by Any Other Name’, that the NBER is not the ‘official arbiter of recessions’.
He argued that the federal government has often used the general definition preferred by most lay people.
‘Rather than tackling the underlying economic problems, the White House is playing word games,’ he wrote.
He said their reliance on the NBER was ‘a highly convenient move’, because the NBER was often very slow to make its declarations.
‘The White House’s attempt to wordsmith its way around a recession shows the dangers of politicizing economic terms,’ he continued.
‘Mr Biden’s economic advisers are trying to buy time by exploiting NBER’s otherwise defensible methodology. They hope doing so will insulate the administration from the electoral backlash in the event of a downturn.’
Biden and his administration did everything possible on Thursday to play down a troubling new economic report that added to the evidence of a recession – trying to pull focus instead to major legislative progress on measures to tame inflation, reduce debt and preserve America’s competitive edge.
US gross domestic product shrank 0.9 percent in the second quarter, following a decline of 1.6 percent decline in the first quarter
The economy has added more than 1 million jobs in the past three months, even as economic growth slowed, in another confusing signal
The US unemployment rate is seen since 1948, with periods of recession shaded in grey. There has never been a recession that was not accompanied by a rapid rise in unemployment
The desire to accentuate the positive reflected the political tensions that are already playing out in the runup to the midterm elections.
Republican politicians are sounding the alarm that a downturn has already started, a claim challenged by Biden and his fellow Democrats who wanted the public to instead focus on a pair of likely wins in Congress.
Republicans said the report showing the economy shrank for the second consecutive quarter was evidence of a ‘Biden recession’ at a time when inflation is at a four-decade high.
Biden, in turn, cited near-record-low unemployment and signs of continued business investment in the economy.
He declared, ‘That doesn’t sound like recession to me.’
The president celebrated congressional passage of a $280 billion bipartisan package to boost the U.S. semiconductor industry and the sudden resurrection of a Democrats-only proposal to lower prescription drug costs, tackle climate change, fund the IRS, establish a minimum corporate tax and cut the deficit.
Other White House officials took Biden’s cue and shrugged off the gross domestic product report showing the economy shrank at an annual rate of 0.9 percent.
‘Where we are right now is we´re on the cusp of doing really historic things that would help move the ball forward on the economy,’ said Brian Deese, director of the White House National Economic Council, when asked about the troubling GDP report.
‘That’s our focus.’
In a rare press conference, Treasury Secretary Janet Yellen allowed that Americans are fundamentally concerned about inflation, not the back-and-forth between Democrats and Republicans about whether the GDP report shows that the economy has slid into a recession.
‘We should avoid a semantic battle,’ Yellen told reporters, adding that Americans´ ‘biggest concern is with inflation’ and that they generally feel good about their ability to find a job and stay employed.
Still, the treasury secretary deployed some rhetoric of her own by saying that growth was ‘slowing,’ when the GDP report showed that the economy has shrunk in size over the past six months.
Yellen portrayed the slowdown as positive for an economy returning to normal after the pandemic – a contrast to the Republicans’ argument that it was an unabashed failure caused by Democratic policies rather than a world’s complicated attempt to re-emerge from the coronavirus pandemic.
Republicans moved quickly to capitalize on the report, with the Republican National Committee declaring it indicative of ‘Biden’s Recession.’
Nearly 8 in 10 Americans described the U.S. economy as poor and roughly 7 in 10 disapproved of Biden’s economic leadership, according to a June survey by AP-NORC Center for Public Affairs Research.
Consumer sentiment as measured by the University of Michigan began to decline as inflation persisted as a threat, with confidence among Democrats relatively weak.
The Federal Reserve, which on Wednesday moved sharply to raise interest rates to further slow the economy in an effort to bring down inflation, signaled that more hikes are on the horizon in a sign that the battle against inflation – and the political skirmishes that follow – could continue well into this year’s November elections.
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