Sunday, February 8, 2009

Could Someone Inform Alan Reynolds of the 1981-82 Recession?

NBER says we had a recession from July 1981 to December 1982 but I guess Alan Reynolds does not know this:

This suggests the entire period from early 1983 to mid-1990 was nothing more than a routine recovery from recession. That is wrong. Real GDP peaked in the first quarter of 1980 at $5,221.3 billion, measured in 2000 dollars. By the first quarter of 1983, real GDP reached $5253.8 billion; the economy had already passed from recovery to expansion. Industrial production hit 59.5 by 1984—well above the peak of 56.6 in 1979.

Reynolds uses this piece of disinformation as part of his attack on Paul Krugman. But let’s look at table 1.1.6 of the National Income and Product Accounts. From 1980QIII to 1981QIII, real GDP rose from $5107.4 billion to $5329.8 billion, which of course, is the recovery that NBER identifies. But Reynolds and other rightwing apologists for the Reagan recession omit this period in their discussion. From 1981QIII to 1982QIII, real GDP fell to $5185.2 billion before we saw the recovery that Paul Krugman discussed.

If one looked at the economy that Bush41 left Clinton to the one that Carter left Reagan, both would be described as economies that were slowly and tentatively recovering from recessions with similar unemployment rates. So if we looked at real GDP growth during the Reagan-Bush41 periods, we could be relatively assured that we would be picking up more of the long-term growth and less of Keynesian features. Real GDP growth during this period was 3% as compared to around 3.5% from thirty years before the Reagan-Bush41 era and 3.7% during the Clinton term. But Alan Reynolds wants to distort this fact and to do so, he has to deny the 1981-82 recession.

5 comments: said...

That is indeed a very serious goog on the part of Reynolds. What a moron. That recession was actually the deepest since the Great Depression, and still is. Unemployment got to over 10%. Part of why it is so easily forgotten is that the recovery from it was very fast, with something on the order of 8% GDP growth in 1983, which set Reagan up for running on his "Morning in America" stuff in 1984, that Orwellian year.

TheTrucker said...

Everyone rational is already aware of the cherry picking that must be done to support the Republican version of political economy. Arguing from a rational point of view and actually using the full historical data is not going to help. Republican econ is a religion.

Every four years the Republicans have a convention where they select the best liar. That individual becomes their candidate for the presidency. Sometimes they can be beaten. But it is not done with logic and rationality. And most certainly it cannot be done by unmasking them as liars. The ability to get away with the lies simply feeds their ego. And each and every neoconomist is awarded commensurate with the ability to snooker the "not so aware".

Obama has offered something better than the typical scorched earth "righteousness" approach to the presidency and it seems to have worked politically. But this can never work in the Senate because the Senate does not represent the people at all. The Senate represents the rich and the powerful even in its best design. Due to the Connecticut Compromise the Senate has become the bastion of Red State power along with being the bastion of rich people power.

There is no way that Ms Congeniality (Harry Reid) is going to ever work in the Senate. The proposal at is the proper methodfor dealing with the problem. Elections are supposed to have consequences. That is why we have them.

Anonymous said...

Trucker, how is that tinfoil hat feeling?

Robin said...

There were two recessions, one in 1980 another in 1981-82. If we use $5329.8 billion as the peak rather than $5221.3, it still remains true that $5253.8 billion exceeded the cyclical peak. After that, we the economy was past recovery and onto expansion, as industrial production also shows.

Robin said...

There's a mistake in my last post. Real GDP did not exceed the third quarter 1981 level until the second quarter of 1983 ($5372.2)-- not the first quarter as Reynolds wrote. That still seems like a nitpick though, not a "very serious goog (sic)."