New York Times Crashed-and-Burned Watch (Worst David Brooks Column Ever Edition)
Permanent and Transitory Components of Real GDP

What Have We Learned since December 6? Not That Much...

For Marketplace...

Last October 4 Kristen Winkler sent me an email: Macroeconomic Associates was estimating then that pace of economic growth in the fourth quarter would be -2% per year: that we had shifted from a maybe-recession or an almost-recession or America's-least-recessive-recession into a serious recession. By October 27 the estimate was down to -2.8%. By November 7, -3.8% . And -6.6% by December 6. So, Four months ago we knew that we were in a serious recession, and that things looked seriously bad.

Ever since then, every day has produced bad economic news on the front pages of the newspapers and on our TV screens. But this news isn’t news. It’s stuff that we knew back last December 6. We should be depressed now yes. We should be scared now, yes. But we should not be any more depressed or scared than we ought to have been four months ago. To become extra-terrified because of what we read over our morning coffee today is like being surprised that a cake tastes like butter, sugar, flour, eggs, and chocolate. You knew what was coming when you mixed up the ingredients and put them in the oven.

We knew this was coming last year. And we should have been preparing for it last year. The very last of the many failures of governance of the Bush administration was its failure to propose a stimulus package in October and to induce the Republicans in congress to pass a stimulus package in November. That wasted three months that we did not have to waste.

The expectation—the hope—is that the economy turns around and starts growing again in the second quarterd. And the expectation—the hope—is that growth speeds up in the second half of this year. Truly bad news would be if this expectation turned out to be wrong. We will have a pretty good idea of what the second half of the year will look like as of July. But until then, don't panic and start hoarding sewing needles and bottled water. And even then, if it looks bad, then it would be time for the government to go for another round of stimulus to keep things from sinking further.