Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

0:00
0:00

Biden’s word play can’t save the United States from a recession

Some denials are more worrying than their absence. A company insisting that its director will be vindicated by the forensic auditors is unlikely to succeed in calming investors; a sports team insisting it has total confidence in its coach is likely to receive a flurry of speculative applications; and a president insisting that ‘we’re not gonna be in a recession in my view’ is unlikely to do consumer confidence a great deal of good.
The major difference here is that the White House has the advantage of being able to mark its own homework. No matter what today’s GDP data shows, Biden’s team will be able to claim the US is not in recession by the cunning mechanism of simply choosing a different definition. Output’s fallen for two quarters in a row? Actually, we think you’ll find it’s a bit more complicated than that; you need to take a holistic view of the economy.

You are probably familiar with the first definition. You’ll find it being used by everyone from the Bank of England to Goldman Sachs to the European Central Bank. It’s even been used by economists at the US Federal Reserve. Take this transcript of a May 1979 meeting of the open market committee responsible for setting interest rates. Called to give forecasts, an economist presenting to the august figures of the committee defines a ‘technical recession’ as ‘two consecutive negative quarters’. Nobody bats an eyelid.

This meeting is particularly interesting given a little more context. It took place at the height of the great inflation, with prices that year rising over 13 per cent as the US economy was buffeted by sudden shocks to energy costs. The second was the presence of one Paul Volcker. In August that year, Volcker would be made chairman of the Federal Reserve. His policies would break the back of inflation, returning the economy to normality at the cost of a steep recession – a historical parallel unlikely to comfort Biden.

The two quarters definition is simple, understandable – and not official in America. As widely adopted as it is, there are other definitions available. Treasury Secretary Janet Yellen has debunked the naive idea that a technical recession is a technical recession, pointing instead to the definition used by the National Bureau of Economic Research.

The NBER dates recessions based on ‘economy-wide measures of economic activity’. Because they’re looking for a big drop in economic activity, across a big chunk of the economy, over an extended period, there is ‘no fixed rule’ for measures and weights. It’s unlikely to declare the US in recession any time soon. This has very little to do with technical definitions: the business cycle dating committee doesn’t like to put a date on peaks and troughs until all the data is in, which takes time. This raises the interesting mental image of Team Biden sitting there declaring all is well while the economy burns down around their ears, waiting for the official proclamation that there is in fact smoke to the fire.

It’s not necessarily the case that the US is about to enter a downturn under any definition. The indicators used to argue that the US is not in recession – employment, industrial output, consumer spending – still show signs of growth. But employment is a lagging indicator which tends to take time to adjust to new economic circumstances, telling you more about how the economy was in the recent past rather than it is now. Consumer spending meanwhile can be driven by concern over the declining value of cash as well as by confidence.

The Federal Reserve Bank of Atlanta’s ‘nowcasting’ model predicts that the US is set for a second quarter of negative economic growth. Given that the latest data is due out today, it would be quite a miss for a generally well-performing estimator if the US turns out to be growing strongly. This concern is compounded by the fact that the Fed raised interest rates again yesterday, further constricting economic activity in the hope of fighting inflation.

And this is the thing; if the US is growing strongly, then Biden has nothing to worry about. You only need to play word games if things are going badly. And while a recession is a fuzzily defined concept, that doesn’t mean that it isn’t something real; there isn’t a scenario where carefully redefining a recession away from ‘two negative quarters of growth’ saves his bacon in the midterms.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Street justice isn’t pretty but how else do you deal with this kind of insanity? Sometimes someone needs to standup and say something
Armenia and Azerbaijan sign U.S.-brokered accord at White House outlining transit link via southern Armenia
Barcelona Resolves Captaincy Issue with Marc-André ter Stegen
US Justice Department Seeks Release of Epstein and Maxwell Grand Jury Exhibits Amid Legal and Victim Challenges
Spain Scraps F-35 Jet Deal as Trump Pushes for More NATO Spending
France Faces Largest Wildfire Since 1949 as Blazes Rage Across Aude
French Senate Report Alleges State Cover‑Up in Perrier ‘Natural Mineral Water’ Scandal
British Labour Government Utilizes Counter-Terrorism Tools for Social Media Monitoring Against Legitimate Critics
OpenAI Launches GPT‑5, Its Most Advanced AI Model Yet
Brazilian President Lula says he’ll contact the leaders of BRICS states to propose a unified response to U.S. tariffs
US envoy Steve Witkoff arrived in Moscow to seek a breakthrough in the Ukraine war ahead of President Trump’s peace deadline
WhatsApp Deletes 6.8 Million Scam Accounts Amid Rising Global Fraud
Britain's Online Safety Law Sparks Outcry Over Privacy, Free Speech, and Mass Surveillance
Nine people have been hospitalized and dozens of salmonella cases have been reported after an outbreak of infections linked to certain brands of pistachios and pistachio-containing products, according to the Public Health Agency of Canada
Karol Nawrocki Inaugurated as Poland’s President, Setting Stage for Clash with Tusk Government
US Charges Two Chinese Nationals for Illegal Nvidia AI Chip Exports
Texas Residents Face Water Restrictions While AI Data Centers Consume Millions of Gallons
U.S. Tariff Policy Triggers Market Volatility Amid Growing Global Trade Tensions
Tariffs, AI, and the Shifting U.S. Macro Landscape: Navigating a New Economic Regime
German Finance Minister Criticizes Trump’s Attacks on Institutions
India Rejects U.S. Tariff Threat, Defends Russian Oil Purchases
United States Establishes Strategic Bitcoin Reserve and Digital Asset Stockpile
Thousands of Private ChatGPT Conversations Accidentally Indexed by Google
China Tightens Mineral Controls, Curtailing Critical Inputs for Western Defence Contractors
OpenAI’s Bold Bet: Teaching AI to Think, Not Just Chat
U.S. Tariffs Surge to Highest Levels in Nearly a Century Under Second Trump Term
Ong Beng Seng Pleads Guilty in Corruption Case Linked to Former Singapore Transport Minister
BP’s Largest Oil and Gas Find in 25 Years Uncovered Offshore Brazil
Italy Fines Shein One Million Euros for Misleading Sustainability Claims
JPMorgan and Coinbase Unveil Partnership to Let Chase Cardholders Buy Crypto Directly
Declassified Annex Links Soros‑Affiliated Officials and Clinton Campaign to ‘Russiagate’ Narrative
UK's Online Safety Law: A Front for Censorship
Parents Abandon Child at Barcelona Airport Over Passport Issue
Bus Driver Discovers Toddler Hidden in Suitcase in New Zealand
Switzerland Celebrates 734 Years of Independence Amid Global Changes
China Enforces Comprehensive Ban on Cryptocurrency Activities
Grok 4 Video plus Voice, can identify wildlife!
George Soros tells the World Economic Forum: "President Trump is a con man and the ultimate narcissist, who wants the world to revolve around him."
Hamas are STARVING the hostages.
The UK Does Not Have a ‘Far-Right’ Problem
British Tourist Dies Following Hair Transplant in Turkey, Police Investigate
WhatsApp Users Targeted in New Scam Involving Account Takeovers
JD Vance Warns Europe Faces “Civilizational Suicide” Over Open Borders and Speech Limits
Germany Enters Fiscal Crisis as Cabinet Approves €174 Billion in New Debt
Trump Administration Finalizes Broad Tariff Increases on Global Trade Partners
JD.com Launches €2.2 Billion Bid for German Electronics Retailer Ceconomy
Azerbaijan Proceeds with Plan to Legalise Casinos on Artificial Islands
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
House Republicans Move to Defund OECD Over Global Tax Dispute
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
×