Exactly Wrong, Again

The message blasted at us day after day by the Obama campaign and its public relations machine, otherwise known as mainstream media, is that we are in a recession, we have been for essentially the last eight years, and the US is unique in this because of the failed policies of George W. Bush.

We are not in recession.  The economy of the last eight years has been fine.  And we are doing better than our European know-it-alls who favor an Obama victory.  At least that's what the most recent economic data show.

A standard definition of recession is two consecutive quarters of negative real growth.  However, the last two quarters of data, January through June, were both positive and in fact the most recent quarter was fairly strong at +2.8%.  The preliminary estimate of GDP for the third quarter (July through September) is scheduled to come out this Thursday, October 30.  So far, we have had zero consecutive quarters of negative growth.  If Thursday's number indicates negative growth, that will still be only one quarter in a row.

In the last eight years there have been no consecutive quarters of negative real growth, none.  Then why do we say there was a recession in 2001?  Because the National Bureau of Economic Research, the accepted recession referee, used a much more complicated formula.  And the NBER said there was an eight month recession in 2001, from March to November.

Around that time there were three (non-consecutive) quarters of negative growth, one under President Clinton  (Q3 of 2000) and two under George W. Bush (Q1 and Q3 of 2001).  An outside observer might think that if there was a recession at all then, it started under President Clinton.  Instead, the NBER said it started six weeks after Bush was sworn in.

In fact, George W. Bush has the distinction of presiding over the only recession of the 20th century in which there was no year-to-year negative real GDP growth at all, as well as no two consecutive negative quarters.  Thank you, NBER.

Since 2001 there has been only one quarter of negative real GDP growth: the fourth quarter of 2007, at -0.2%.  However, that quarter was preceded by two quarters of strongly positive real growth: +4.8% in each of the previous two quarters.  In all, GDP growth was +2.3% in 2007.

The real GDP growth under all George W. Bush averaged 2.3% per year so far.  The individual years were as follows.

2001    +0.2%

2002    +1.9%

2003    +3.7%

2004    +3.1%

2005    +2.7%

2006    +2.4%

2007    +2.3%

2008    +1.8% (first half only)

If you don't have a feel for what is considered "good", I recommend the four-point scale just like in school.  GDP growth of 4% or above is an A, 3% a B, 2% a C, 1% a D and below 1% is an F.  At an overall average of 2.3%, George W. Bush earns a C.  His only F was in 2001, with a recession inherited from President Clinton, nine months under Clinton's federal budget, and the 9/11 attacks.

In fact, Bush got his best marks in the middle of his two terms, suspiciously matching when both houses of Congress had Republican majorities.

GDP does not measure everything, of course.  But unemployment averaged 5.2% under Bush, exactly the same as under Clinton.  And the recent level of 6.1% is not considered all that high by historical standards.  In fact, the level was at or above 6.1% for 19 consecutive months under Clinton.  Inflation has been tame.  Real disposable personal income grew.  We're OK.  Or at least we were through June.

And how does this compare with our better, wiser European counterparts?  Unlike the US, which showed positive growth of 2.8% in the second quarter of 2008, Europe's GDP declined 0.2% .  In particular, France's GDP declined 0.3%  and Germany's declined 0.5% .

Now tell me, if George W. Bush is the problem, why has Europe's economy declined while the US's hasn't?  Is Europe leading the world in laissez-faire economics and deregulation -- is that the problem?

European stock markets have nothing to brag about when comparing themselves to the US.

World Stock Markets

Country (Market)



Oct-08 (now)


US (S&P 500)








Germany (DAX)




France (CAC 40)




Switzerland (SSMI)




Sweden (OMXS)





The real story is exactly the opposite of that being told by the Obama campaign and mainstream media.  The problem is lack of free markets.

  • The federal register in 2004 held 78,851 pages of regulations, or the equivalent of 30 New Deals.  The equivalent of almost two New Deals was added between 1999 and 2004.
  • Sarbanes-Oxley, adding onerous new regulations on corporations designed to hopefully prevent future Enrons, was enacted in mid-2002.  It didn't quite work with Fannie Mae, Freddie Mac or investment banks, did it?
  • The first increase in the minimum wage in 10 years came in 2007; a second increase came in the summer of 2008.  In May of 2007 (before the increase), the unemployment rate stood at 4.5%.  The latest rate (after two minimum wage increases in two years) stands at 6.1%.
  • The housing and financial crisis can be attributed directly to federal regulations and mismanagement at the Government Sponsored Entities of Fannie Mae and Freddie Mac.

If there was a failure to regulate hedge funds, Credit Deposit Swaps, etc., then that failure was worldwide and not something dreamed up by George W. Bush.  If you haven't noticed, banks are failing around the globe, virtually every stock market around the globe is in decline (usually more than US markets), and Iceland is essentially bankrupt.

Iceland.  Tell me again how George Bush destroyed Iceland's economy.

It is possible that this Thursday's real GDP growth estimate for the third quarter will be positive.  What will everyone say then?  If it is, that will mean a full year of recession talk coming from the media with absolutely zero real data to back it up.  Even if the number indicates negative growth, it would not necessarily mean recession, since that would be only one quarter so far.  And if we are in recession, then it started very recently, and after the recession in Europe.

Here's a tip: stop imitating Europe.  A government should not need to spend 40% of a country's GDP, for example.

Frankly, I'm surprised our economy has done as well as it has for as long as it has.  Virtually everything the government has done to "help", hurt.  Stock markets are down about 30% since the bailout was passed, for example.

Or is it since an Obama victory looks likely?

Randall Hoven can be contacted at randall.hoven@gmail.com or  via his web site, kulak.worldbreak.com.