Editore"s Note
Tilting at Windmills

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February 27, 2009

FALLING OFF A CLIFF.... About a month ago, initial estimates showed that the U.S. economy shrank by 3.8% in the fourth quarter of 2008. One analyst, at the time, described it as an economic "train wreck."

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If 3.8% was a train wreck, we're going to need a whole new list of adjectives to describe the new numbers.

The fourth-quarter estimate was revised this morning, and as it turns out, the economy shrank by 6.2%. This graph, by way of the Washington Post, helps drive the point home nicely.

It was the worst economic showing in a quarter-century.

There was, alas, no silver lining. The Post reported, "Nearly every segment of the economy contracted sharply during the fourth quarter, the data show. Consumer spending fell 4.3 percent, compared with 3.8 percent in the third quarter. Investment in office buildings, shopping centers and other nonresidential structures sank 5.9 percent, compared with an increase of 9.7 percent in the previous quarter. Real exports of goods and services plummeted 23.6 percent, compared with an increase of 3 percent in the third quarter. As tax revenue plunged, state and local government spending also fell 1.4 percent, after rising 1.3 percent in the period from July through October. For all of 2008, the economy grew 1.1 percent, in contrast to an increase of 2 percent in 2007."

Dean Baker added, "I've been pretty pessimistic all along, but [the numbers] came in worse than I expected and that's pretty bad. You worry this is just a free fall."

I have a hunch a spending freeze and a capital gains tax cut probably won't help.

Steve Benen 10:35 AM Permalink | Trackbacks | Comments (21)

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Comments

Boy, these numbers are astounding. I wonder what would have happened if Bush would have addressed the recession at the beginning of 2008 (when it was happening)? By the way does anyone remember the end result of Bush's $3.1 trillion budget for 2009?

Posted by: coral on February 27, 2009 at 10:32 AM | PERMALINK

We (as in the whole world) are all Enron now.

Hey Repugs. How's that ownership economy working out fer ya?

Posted by: Former Dan on February 27, 2009 at 10:33 AM | PERMALINK

"I have a hunch a spending freeze and a capital gains tax cut probably won't help."

But Thank God we passed the Obamination that will make everything all better.

The One believes so. His budget assumes that economic growth will be 3.5% next year. As Krauthammer said last night on Special Report, all presidential budgets are fantasies, but this is Fantasia.

Posted by: Chicounsel on February 27, 2009 at 10:35 AM | PERMALINK

One of the sadder dynamics to be noted here is that the economy shrank right in the middle of a heated election cycle when, traditionally, the economy gets a bump from the infusion of political money.

The Bush Presidency will be remembered as Hoover2! -Kevo

Posted by: kevo on February 27, 2009 at 10:38 AM | PERMALINK

Was the 80's recession really that bad? I don't remember it firsthand, but from reading about it it doesn't seem like it had the same feelings of disaster we are having this time around. It must have been worse by the numbers though, if these are the worst economy numbers since then.

Posted by: ArkPanda on February 27, 2009 at 10:40 AM | PERMALINK

Chicounsel, why are you attempting to divert attention?

Posted by: dk on February 27, 2009 at 10:48 AM | PERMALINK

Globalization:

Works if things are rosy, sucks when GDP's fall everywhere.

Are we entering a de-globalization era?

You would think that Wealthcare (all them bailouts last year) would've solved everything.

Wealthcare: protecting the wealth of the few at the expense of the many.

Buy gold.

Stock up on food.

Watch your back.

God Bush America! (and he did)

Posted by: Tom Nicholson on February 27, 2009 at 10:49 AM | PERMALINK

I think that this is positive news. The earlier numbers assumed a greater inventory build up than actually occurred. That means that business did a good job keeping their inventory levels in line and they won't have to work off excess inventory before resuming more normal operations. This does not make current conditions any better, but it means that we see improvement sooner than we otherwise would.

Posted by: steve on February 27, 2009 at 10:50 AM | PERMALINK

Chicounsel - Please take your comments to Politico or Red State. If you haven't noticed, people are at least attempting to be substantive and constructive on this blog. You embarrass yourself with this "The One" stuff. I for one welcome your critique of Obama's policies provided it does not come in the form of this sophmoric nonsense. Please keep it substantive.

Posted by: Scott F. on February 27, 2009 at 10:51 AM | PERMALINK

The early 80's were quite bad (at the time I'd just graduated from college and was looking for my first job; that was fun - NOT). However that recession was essentially voluntary. The Federal Reserve had decided to finally do something about inflation, and had raised interest rates near 20%, causing the macroeconomy to choke.

The early 80's recession came a few years after the mid-70's, which had ranged economically between moderately to severely crappy, so by the time the early 80's downturn was over, there was a great deal of pent-up consumer demand. (Unlike today, in the 70's credit standards were still pretty stringent, so there hadn't been a consumer debt binge to fuel demand.) Plus the high inflation that reigned throughout the previous decade hadn't been fun, and for investors, the stock market essentially marked time (with ups and downs) from about '64 to '81.

So that recession was different in character than what we have now, whatever comparison you want to make with the bare numbers. However both were bad.

Posted by: jimBOB on February 27, 2009 at 10:53 AM | PERMALINK

I think you need to modify your post to specify that it's the annualized rate they're referring to.

Posted by: Leszek Pawlowicz on February 27, 2009 at 10:55 AM | PERMALINK

I wonder what would have happened if Bush would have addressed the recession at the beginning of 2008

Or 2007. Bush was trying to become invisible for at least the last year before the election. Raising awareness by actively trying to address economic problems (even in his typically inept way) would have made the Republican party even more toxic in 2008.

Posted by: qwerty on February 27, 2009 at 10:58 AM | PERMALINK

Leszek Pawlowicz - did you notice the top of the graph?

Posted by: Danp on February 27, 2009 at 11:03 AM | PERMALINK

"I think you need to modify your post to specify that it's the annualized rate they're referring to."

Indeed.

The economy at the end of 2008 was about 1.65% smaller (by gdp) than it was at the end of Q2 2008, NOT 6.7% smaller. Kind of amazing how just a few percent can make such a difference. Though I suppose the economy is another 1% or so smaller by now than it was at the end of 2008.

Posted by: JeffF on February 27, 2009 at 12:10 PM | PERMALINK

... although, population growth makes these numbers worse in the US. US population grows at around 0.9% a year, so we also loose a bit over 0.2% per capita gdp each quarter from that.

Posted by: JeffF on February 27, 2009 at 12:12 PM | PERMALINK

It will be amusing to see the rightwing talking points on this.

Will they still try to claim that this is Obama's recession, even though it clearly was superbad before he took office?

Will they still try to claim that the current state of the economy isnt all that bad, and thus does not necessitate major government intervention?

Obviously the answer to the first question is Yes. What else do they have to go on?

For the second question, I used to see rightwingers talk about how Obama was using scare tactics to pump up the economic crisis as worse than it really was in order to push through a lot of spending that we didnt actually need. I think it will be very difficult for them to continue saying that with a straight face.

Posted by: TG Chicago on February 27, 2009 at 12:13 PM | PERMALINK

Re the 80's recession: I remember 1979 as the year my hubby graduated from college with a degree that would help him gain employment with the National Park Service or Forest Service. Unfortunately the government enacted a hiring freeze that year: no job. So he ended up retraining in a different field, in which he is still employed. We bought our first (teeny tiny) house in 1982 and could only qualify for a loan with a graduated interest rate - IIRC it started at ~8% and went up 1% per year for five years. Fortunately we were able to move to a larger house a few years later when rates were lower (and our employment improved).

Anyway, all of this takes me back to Phil Gramm and his "nation of whiners" and "mental recession" remarks. Talk about being out of touch.

Our president is giving a(nother) knock out speech right now on getting us out of Iraq. He's speaking directly to the Iraqis right now, as a nation and a people. Good stuff.

Posted by: Oregonian on February 27, 2009 at 12:15 PM | PERMALINK

L is for losers, which is what the economy is going to make most Americans.

Posted by: Brojo on February 27, 2009 at 12:16 PM | PERMALINK
I have a hunch a spending freeze and a capital gains tax cut probably won't help.

Changing the distribution of taxation by taxing capital gains as normal income while reducing personal and corporate income taxes rates, OTOH, might; you'd cut taxes on workers and businesses, making it less expensive to do business and to hire people at any given level of take-home pay, and you'd make it relatively more attractive to invest in stocks based on dividends rather than based on resale, which would decrease the systemic incentives for short-sighted decision making and volatility.

Posted by: cmdicely on February 27, 2009 at 12:50 PM | PERMALINK

We're gonna need a bigger boat!

Posted by: alagator on February 27, 2009 at 6:23 PM | PERMALINK


clinton to bush:

GDP growth - 4th quarter 2000: +2.0%


bush to obama:

GDP growth - 4th quarter 2008: -6.2%

thanks mr. tax cuts!

Posted by: mr. irony on February 27, 2009 at 7:25 PM | PERMALINK




 

 

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