The Corner

Grading the Recovery

Stephen Moore writes:

On economic growth, real GDP has risen 0.8% over the 13 quarters since the recession began, compared to an average increase of 9.9% in past recoveries. From the beginning of the recession to April 2011, real personal income has grown just .9% compared to 9.4% for the same period in previous post 1960 recessions.

The standard response from Obama apologists is that recession of 2008 and 2009 was different because, as former Clinton administration economist Robert Shapiro puts it, “this was a financial crisis, and these take longer to recover from.” In fact, in most cases, the deeper the recession, the stronger the recovery to make up for lost ground.

That “in fact” makes it sound  as though Moore’s point contradicts Shapiro’s, but it doesn’t. There’s no reason that it couldn’t simultaneously be true that growth tends to be faster following deep recessions and that growth tends to be slower following recessions induced by financial crises. But Scott Sumner offered other reasons for skepticism about the financial-crisis argument in an April article for The Economist:

Not only is the so-called “jobless recovery” exactly what we should have expected from slow RGDP growth, but the slow RGDP growth is exactly what we should have expected from slow NGDP growth. . . . Some will point to the fact that severe financial crises are usually followed by sub-par recoveries. Yes, but few of those cases saw the currency of the afflicted country soar in forex markets in the teeth of the financial panic.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.


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