Posted by
Disgruntled in NY on Tuesday, September 01, 2009 10:07:29 AM
Allan Meltzer, a professor at Carnegie Mellon University has an
article in today's WSJ that compares the current (?) recession to other economic troughs in the 20th century ('37-'38, '73-'75 and '81-'82). By his numbers, the current recession is not really worse statistically than the recessions of '73-'75 or '81-'82 (the max unemployment rate (so far) is slightly worse than '73-'75 and not as bad as '81-'82; the decline in real GDP is (compared to his sample) only worse than '81-'82; the decline in industrial production in the current recession is the the only area where the current recession is clearly worse than both '73-'75 and '81-'82). He does not provide numbers comparing the current recession to other more "ordinary" recessions or to the unrivaled (at least in the 20th century) depression in the early 30s.
The interesting question that Meltzer draws from the above facts is: "why do many opinion makers insist on inaccurate and frightening analogies that overstate the severity of present conditions?" Not surprisingly, the answer is that our policy makers don't want to "waste a crisis" (to quote the WH Chief of Staff). In every recession I can remember, there has been a chorus (mostly from the left) singing the praises of government intervention to save our way of life. The difference in 2009 is that we have a WH and Congress (and Press) that are controlled by people who truly believe that only the government can save us. There are also those among them who believe that the economic crisis can be used to implement long-lasting extreme measures that could not be passed if (i) there was no recession and (ii) they did not have the political power (i.e., control of WH and Congress) to pass such measures over strenuous opposition from the right and center.