The Biden administration has been trying to change the definition of recession to lessen the impact of the upcoming economic data releasing Thursday, but one economist has destroyed the admin’s argument with a single graph.
Most people would consider a recession to be when a nation shows back-to-back quarters of negative GDP growth as many definitions define it. However, Biden officials, including Treasury Secretary Janet Yellen and economic adviser Brian Deese, have argued in recent months that, even should Thursday’s economic information come back showing negative growth for the second quarter in a row, the economy is not necessarily in a recession.
A statement from the White House last week said, “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 recent attempts to move the goalposts led Michael Strain, resident scholar and director of economic policy studies at the American Enterprise Institute, to take to Twitter to point out that each of the past 10 times the economy has experienced two consecutive quarters of negative growth, a recession has, in fact, ultimately been declared.
Strain posed a question to his followers in the tweet, “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.”https://twitter.com/MichaelRStrain/status/1551614956256256000?s=20&t=c0ahTTy8h6aWFqfcPtXzmQ
Officially, the National Bureau of Economic Research decides if and when the economy is in a recession and does so by looking at many different factors affecting the economy 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.
But two consecutive quarters of contraction has historically been incredibly reliable as a correlate of recessions as Strain’s tweet calls into focus.
E.J. Antoni, researcher for regional economics at The Heritage Foundation, told the Daily Caller News Foundation that this pattern can be observed as far back as World War II.
“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 said.
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