White House Press Secretary Jay Carney made a surprising assertion on MSNBC Wednesday, saying that in early 2009, as Barack Obama was taking office, there weren't any major economists who understood just how bad the recession was.
The problem is that the evidence doesn't support his claim.
"There was not a single mainstream, Wall Street, academic economist who knew at the time, in January of 2009, just how deep the economic hole was that we were in," Carney told Morning Joe hosts Mika Brzezinski and Joe Scarborough on Wednesday's program.
Scarborough had asked Carney how President Obama might respond to accusations that the stimulus act passed in February 2009 failed to prevent unemployment from climbing.
In response, Carney pointed out that at the time, economists believed the economy had shrunk only 3.8 percent in the fourth quarter of 2008 -- but that experts now believe the contraction was much worse, approaching 9 percent for the quarter. This reflects the larger narrative of the Great Recession: Many initial assessments missed the scale of the problem, and it wasn't until later that the official statistics more closely described the damage done to the economy.
Carney's implication seemed to be that no one realized the severity of the situation in early 2009, and that the White House acted as best it could with the information it had.
"We were in an economic free-fall, and we know now that the hole that was dug by the recession was much deeper than we understood at the time," Carney told Scarborough and Brzezinski.
In reality, though, well-respected analysts and economists from all corners were sounding alarms about the state of the economy -- in early 2009, and even before.
Numerous experts warned that the stimulus bill wouldn't go far enough to address the nation's economic woes as it was making its way through Congress in the early days of Obama's presidency. They cautioned that the economy was pointed toward higher unemployment and weak or nonexistent growth -- conditions that have indeed come to characterize Obama's first term in office.
For example, Douglas Elmendorf, director of the non-partisan Congressional Budget Office, testified before the House Budget Committee on on January 27, 2009, that without immediate action, the economy would sag below its potential by nearly 7 percent for the next two years, and that unemployment would exceed 9 percent by early 2010 -- something that actually happened four months later, in May 2009.
Describing this projected gap between potential and actual economic output, Elmendorf called it the largest shortfall "in terms of both length and depth ... since the Depression of the 1930s."
That same month, Paul Krugman, a left-leaning economist and Nobel laureate, wrote in a New York Times column that Obama's plan to jump-start the economy was "nowhere near big enough," arguing that it was "unlikely to close more than half of the looming output gap" at a time when the country was experiencing "the most dangerous economic crisis since the Great Depression."
But Krugman wasn't the only economist to draw a Great Depression comparison. Martin Feldstein, Harvard professor and former economic adviser to Ronald Reagan, wrote in January 2009 that "this recession is likely to last longer and be more damaging than any since the depression of the 1930's."
And James Galbraith, a left-leaning economist and former executive director of the Joint Economic Committee said, "there are many good reasons to think" that America is in "a true financial crisis of the type in the 1930s." Mark Zandi, chief economist at Moody's Analytics warned at the time that "the economy appears headed toward its worst downturn since the Great Depression."
Dean Baker, a left-leaning economist and co-director of the Center for Economic and Policy Research, issued a warning similar to Krugman's in January 2009, writing in the Guardian that "[t]his downturn is so severe that [the stimulus bill] may not be sufficient to offset even half of its impact."
And a January 2009 survey of more than 100 economists, conducted by the National Association for Business Economics, found that that business conditions overall were the worst in the survey's 27-year history. At the time,78 percent of the economists said they expected GDP to keep falling.
Strongly-worded warnings about the economy were pouring in even before January 2009, in fact. Nine months earlier, in April 2008, left-leaning economist Joseph Stiglitz, a Columbia professor and Nobel laureate, told CNBC that the recession was "going to be one of the worst economic downturns since the Great Depression." And as early as 2006, the economist and New York University professor Nouriel Roubini -- famous for his perennially bearish outlook, but also regarded by many as a prescient forecaster -- was predicting a recession, triggered by a softening housing market, that would be "much nastier, deeper and more protracted than the 2001 recession."
"There were a lot of us who were saying that the stimulus was nowhere near large enough at the time," Baker told The Huffington Post when reached for comment on Wednesday. "The fact that it was going to be considerably more severe than the Obama administration was predicting at the time -- there were a number of us who were quite explicit about that."
Origin
Source: Huff
The problem is that the evidence doesn't support his claim.
"There was not a single mainstream, Wall Street, academic economist who knew at the time, in January of 2009, just how deep the economic hole was that we were in," Carney told Morning Joe hosts Mika Brzezinski and Joe Scarborough on Wednesday's program.
Scarborough had asked Carney how President Obama might respond to accusations that the stimulus act passed in February 2009 failed to prevent unemployment from climbing.
In response, Carney pointed out that at the time, economists believed the economy had shrunk only 3.8 percent in the fourth quarter of 2008 -- but that experts now believe the contraction was much worse, approaching 9 percent for the quarter. This reflects the larger narrative of the Great Recession: Many initial assessments missed the scale of the problem, and it wasn't until later that the official statistics more closely described the damage done to the economy.
Carney's implication seemed to be that no one realized the severity of the situation in early 2009, and that the White House acted as best it could with the information it had.
"We were in an economic free-fall, and we know now that the hole that was dug by the recession was much deeper than we understood at the time," Carney told Scarborough and Brzezinski.
In reality, though, well-respected analysts and economists from all corners were sounding alarms about the state of the economy -- in early 2009, and even before.
Numerous experts warned that the stimulus bill wouldn't go far enough to address the nation's economic woes as it was making its way through Congress in the early days of Obama's presidency. They cautioned that the economy was pointed toward higher unemployment and weak or nonexistent growth -- conditions that have indeed come to characterize Obama's first term in office.
For example, Douglas Elmendorf, director of the non-partisan Congressional Budget Office, testified before the House Budget Committee on on January 27, 2009, that without immediate action, the economy would sag below its potential by nearly 7 percent for the next two years, and that unemployment would exceed 9 percent by early 2010 -- something that actually happened four months later, in May 2009.
Describing this projected gap between potential and actual economic output, Elmendorf called it the largest shortfall "in terms of both length and depth ... since the Depression of the 1930s."
That same month, Paul Krugman, a left-leaning economist and Nobel laureate, wrote in a New York Times column that Obama's plan to jump-start the economy was "nowhere near big enough," arguing that it was "unlikely to close more than half of the looming output gap" at a time when the country was experiencing "the most dangerous economic crisis since the Great Depression."
But Krugman wasn't the only economist to draw a Great Depression comparison. Martin Feldstein, Harvard professor and former economic adviser to Ronald Reagan, wrote in January 2009 that "this recession is likely to last longer and be more damaging than any since the depression of the 1930's."
And James Galbraith, a left-leaning economist and former executive director of the Joint Economic Committee said, "there are many good reasons to think" that America is in "a true financial crisis of the type in the 1930s." Mark Zandi, chief economist at Moody's Analytics warned at the time that "the economy appears headed toward its worst downturn since the Great Depression."
Dean Baker, a left-leaning economist and co-director of the Center for Economic and Policy Research, issued a warning similar to Krugman's in January 2009, writing in the Guardian that "[t]his downturn is so severe that [the stimulus bill] may not be sufficient to offset even half of its impact."
And a January 2009 survey of more than 100 economists, conducted by the National Association for Business Economics, found that that business conditions overall were the worst in the survey's 27-year history. At the time,78 percent of the economists said they expected GDP to keep falling.
Strongly-worded warnings about the economy were pouring in even before January 2009, in fact. Nine months earlier, in April 2008, left-leaning economist Joseph Stiglitz, a Columbia professor and Nobel laureate, told CNBC that the recession was "going to be one of the worst economic downturns since the Great Depression." And as early as 2006, the economist and New York University professor Nouriel Roubini -- famous for his perennially bearish outlook, but also regarded by many as a prescient forecaster -- was predicting a recession, triggered by a softening housing market, that would be "much nastier, deeper and more protracted than the 2001 recession."
"There were a lot of us who were saying that the stimulus was nowhere near large enough at the time," Baker told The Huffington Post when reached for comment on Wednesday. "The fact that it was going to be considerably more severe than the Obama administration was predicting at the time -- there were a number of us who were quite explicit about that."
Origin
Source: Huff
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