Ben Stein has some news for you, this week. "The economy isn’t at its best," he concedes. "But over all, it’s not all that bad."
Yes, little Benjy Sunshine is back, and he’s up to the same old tricks, especially when it comes to massaging the employment numbers: Dean Baker, as ever, does a great job of debunking his claims on that front. But he lets Stein get away with his misrepresentation of what recessions are:
It’s possible that the G.D.P. will not show growth in the second quarter. So, by the old definition — two straight downward quarters of G.D.P. — we cannot know if we have just entered a recession. We’ll get to the new definition in a moment…
Now, it is entirely possible that the National Bureau of Economic Research, the arbiter of recessions, will declare a recession. The bureau now uses its own judgment to decide if there is one. It bases its view on data on employment, industrial production, personal income growth, manufacturing, wholesale and retail sales, and a non-governmental estimate of the past quarter’s G.D.P. movement from a group called Macroeconomic Advisers.
Is there really no way that a Stein column can ever be fact-checked? Stein’s claiming here that there was an old way of defining a recession – two successive quarters of negative growth – which has now been supplanted by the new way, which involves the NBER using "its own judgment".
This is utter crap. The NBER has always been the arbiter of recessions, and it has always used its own judgment in deciding when they started and ended. No one with any authority ever claimed that there was a recession if and only if there were two successive quarters of negative growth; and as Lakshman Achuthan and Anirvan Banerji explain, such claims are dangerous. Not that Stein cares about such things, although his father certainly would have.
Stein is also far off base when it comes to the importance of the banking system to the economy:
Huge bank write-downs are bitter pills for the affected banks’ stockholders, but not enough to sink an economy of this size.
Ben, it’s not the write-downs which sink an economy, it’s the deleveraging. If the banks stop lending because they’ve run out of money, yes, that’s easily enough to sink an economy of any size, no matter what happens to government spending. Fiscal stimulus is all well and good, but it can’t offset the vicious deleveraging cycle.
Of course, this wouldn’t be a Stein column without a vapid and annoying attempt to sum everything up:
What is the future? We will get through all of it. “This great nation will endure as it has endured,” to quote F.D.R. We will then go on to whatever the new problems will be (probably the same as the old problems) and the media will have to find something new to complain about. This is called life.
Does Stein know what he’s quoting here? It’s FDR’s first inauguaral address, dating from the depths of the recession in 1933. Here’s a taster:
Values have shrunken to fantastic levels; taxes have risen; our ability to pay has fallen; government of all kinds is faced by serious curtailment of income; the means of exchange are frozen in the currents of trade; the withered leaves of industrial enterprise lie on every side; farmers find no markets for their produce; the savings of many years in thousands of families are gone.
More important, a host of unemployed citizens face the grim problem of existence, and an equally great number toil with little return. Only a foolish optimist can deny the dark realities of the moment.
This is where Stein turns when he wants to assure us that things are "not all that bad". Well, things are undoubtedly better now than they were in 1933, but I reckon that’s setting the bar pretty low. As for the implication that any perceived weakness in the economy is simply the fault of whining by the media, I’d urge Stein to look once more at FDR’s address, and its emphasis on the importance of candor. He might learn something.