The Biden administration appears to be preparing for a recessionor rather, for news of one. Rather than tackling the underlying economic problems, the White House is playing word games.
Economists have long defined a recession as a period in which real GDP declines for at least two consecutive quarters, to quote the popular economics textbook by Nobel laureates Paul Samuelson and William Nordhaus. This definition isnt perfect, but it describes almost every downturn since World War II.
With expectations of low or even negative growth for the first two quarters of 2022, President Bidens Council of Economic Advisers has been trying to blunt the news by disavowing this textbook definition. It is neither the official definition nor the way economists evaluate the state of the business cycle, reads a post on the White House website. Treasury Secretary Janet Yellen endorsed the claim on NBC over the weekend.
In place of the standard economic definition of a recession, administration officials point to the business-cycle dating committee of the National Bureau of Economic Research as the official recession scorekeeper. Its a highly convenient move for them. While the nonpartisan NBER employs a robust set of indicators to pinpoint recessions, it does so retrospectively. The great recession of 2007-09, for example, had already been under way for a year before the NBER released its determination. Sometimes recessions end by the time NBER classifies them, and this built-in delay limits the utility of NBER scorekeeping for real-time policy decisions.