The economy sucks, but that’s expected
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TEXT OF COMMENTARY
Kai Ryssdal: By almost any measure the economic news is grim. Gross domestic product is shrinking. Unemployment is up. The stock markets are off 50 percent or more. Everything is going in the wrong direction. Unless, it’s not. The president told us things would get worse before they got better. And commentator and economist Brad DeLong says anyone who’s surprised by the turn of events really just hasn’t been paying attention.
BRAD DELONG: Last October 4th, Kristin Winkler sent me an e-mail. Macroeconomic Associates was estimating then that pace of economic growth in the fourth quarter would be minus 2 percent per year. That we had shifted from a maybe-recession or an almost-recession or an America’s-least-recessive recession into a serious recession. By December 6th, they were down to minus 6.6 percent. Four months ago we knew that we were in a serious recession, and we knew 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 is not news. This is stuff that we knew back last December 6th. We should be depressed now. We should be scared now. But we should not be any more depressed or scared now than we ought to have been four months ago. To become extra-terrified today because of what we read or see is like being surprised when our cake tastes like butter, sugar, flour, eggs and chocolate. You know what is coming when you mix 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 really did not have to waste.
The expectation, the hope, is that the economy turns around and starts growing again in the second quarter. 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 turns 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 things look bad, then the right reaction is it’s time for the government to go for another round of stimulus to keep things from sinking further.
Kai Ryssdal: Brad DeLong is a professor of economics at the University of California, Berkeley.
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