Posted by Rojas @ 11:40 pm on July 11th 2008

Phil Gramm is correct

As is my tradition here, I find myself compelled to defend the indefensible. In this case, Phil Gramm’s comments regarding America’s economic hardship.

Gramm–who himself holds a Doctorate in Economics–has managed to get himself and the entire McCain campaign in trouble with his spectacularly impolitic remarks regarding the American economy. Specifically:

“You’ve heard of mental depression; this is a mental recession,” Gramm told the Times. He noted that growth has held up at about 1 percent despite all the publicity over losing jobs to India, China, illegal immigration, housing and credit problems and record oil prices. “We may have a recession; we haven’t had one yet.”

I’ll begin by granting that this is not the sort of comment which is likely to help any politician electorally, and by recognizing that Barack Obama cleanly “won” the news cycle on the issue. But as ever, I find myself bothered by the nagging question: is the speaker actually incorrect?

In point of fact, he isn’t. At all.

This is a matter that’s been bothering me for some time. Ours has become a culture which venerates public opinion to an almost ridiculous extent, even at times reaching the point where we see it as trumping actual fact. It seems that a week doesn’t go by that I don’t witness some kind of inane survey or poll regarding the question: Is the United States in a recession?

The point, of course, is that the question of whether the United States is in a recession or not is not subject to public opinion, for the simple reason that a recession is a reasonably precise economic term which can be empirically measured. If the United States economy enters a period of negative economic growth for an extended period of time (usually two quarters or longer) as measured by the National Bureau of Economic Research, the US is in a recession. If it does not, it is not. Period. Gramm’s point, which is stated quite plainly, is that the US is not, definitionally, in a recession, and to argue otherwise is a matter not of compassion or of politics, but of simple ignorance. We don’t get to pick facts.

Of course, the armies of compassion have hopped on Gramm’s comments as being somehow insensitive to people who are undergoing hard economic times. I find this ludicrous. At no point does Gramm deny that economic hardship can occur during a time of economic growth. Nor does Gramm assert that the economy is healthy on the whole; indeed, Gramm’s dedication to such long-term economic concerns as deficit reduction and entitlement reform suggest that he has a better grasp of the real dangers to our economy than most of those who are complaining about his comments.

If Gramm is guilty of anything, it is of asserting that the American people as a whole ought to toughen up a bit where their present economic “hardship” is concerned. George Will makes the same point at the 4:00 mark of this clip from his recent Charlie Rose interview:

I think our pain threshold has become so low that we are in danger of becoming the crybabies of the western world. Today, the American people believe we’re in a recession; we’re not. A recession is serviceably defined as two consecutive quarters of economic contraction; the last quarter we grew yet again. Not enough, but we grew. Today we have an unemployment rate of five percent. The postwar era average is 5.6 percent. The economy is not in terrible shape.

Gramm and Will don’t tell the whole story, but on its own merits I find their argument persuasive. A middle class American, whether employed or not, whether indebted or not, enjoys a standard of living superior to 99% of the historic population of this planet and 95% of human beings alive today. As severe as the long-term problems confronting our economy are, the present status of the economy does not justify the crisis rhetoric fostered by the media and by politicians of both parties.

Phil Gramm is guilty of nothing more than speaking inconvenient truths. It is a damn shame to see the whole internet flocking to bash him for it. I’d like to think that our respect for facts would exist independent of their political utility.

1 Comment »

  1. I have been trying to explain this very thing to people for a long time.

    Comment by James — 7/12/2008 @ 1:37 pm

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