Officially Declaring A Recession Reveals Disconnection By Officials

December 2, 2008

The Facts

Yesterday the top economists of the US said that a recession exists, and that the recession began in December of last year; exactly one year later. The National Bureau of Economic Research, our official voice on the matter, validated what the economists said. So that makes it official.

An article by the Boston Globe put it this way; “The dismal economic data were underscored by the National Bureau of Economic Research, which made official yesterday what many economists and millions of unemployed people already knew: The economy is in recession”. The thing that caught my eye in this article is the same thing I and many other have been saying for months; “millions of unemployed people already knew”, meaning the ordinary working folks. But we all know nothing is official until its official.

My View

There was one other thing that caught my eye in the Globe article, and it goes to the core of what I said in a post back in August. I’m referring to the definition of a recession. Now we all know that in order to put our finger on a definitive problem there first has to be a definition of the problem. But this is what the Globe said: “Although ‘recession’ is commonly defined as two consecutive quarterly declines in gross domestic product, or the economy’s output of goods and services, the organization defines a recession differently [bold/underline added], as ‘a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators’.” And, in my opinion, therein lies the problem; the different definitions that are used by some to support their ideology. I have no doubt what-so-ever that politics and ideology plays a big role in not declaring a recession earlier. As the Globe article pointed out, unemployment, personal income, and other measures fell every month since December of last year. So why did it take an additional six months before a recession was declared?

Ok, so you ask what difference it makes; well, it’s the age old adage that you can’t fix a problem until you acknowledge the problem and face up to it. But in this case, it goes back to what I said in the post referenced above; it depends on who has what to loose and who has what to gain by admitting or not admitting to a recession. And as long as ideology and wealth concerns are involved in the decision making process, we all know what the final decision will be solely based upon. Add to that the fact that we have become a nation of reactionaries as opposed to taking action and the problem is compounded. A recession will not simply go away by ignoring it and/or denying it.

Of course, when a recession is finally admitted, the focal point is never toward what really matters, and that’s the 95% of the people in the country. Just about every article you read on the matter or every televised report you hear, the focus is directed toward the market. In other words, the place where the upper crust earn their living. Proof of that lies in the fact that the only thing any of them are talking about today is how the Dow dropped nearly 700 points yesterday on the news that a recession was officially declared. I know there are those who will say as the market goes so goes the nation. That’s only partly true. The whole truth lies in that other old adage, which I’ve slightly altered; when my neighbor looses his income it’s a slowdown, but when I loose my income, it’s a recession.