Is this recovery really the weakest?

Brad Delong takes Taylor, Hubbard Cogan and Warsh (THCW) to task for implying that the weak growth achieved, roughly, under President Obama is an anomaly and reflects a uniquely bad policy backdrop.  Delong points out, convincingly in my view, that the growth slowdown is a long-term trend and that THCW are guilty of data mining.

Having gotten into a bit of a lather over this, Delong then digs up some evidence that roughly this same cast of characters misstated the impact of the Obama stimulus by assuming that it would be met by Fed rate hikes which, yes, would have blunted its effect. But the whole point of such stimulus was to offset liquidity trap, which means that assuming the Fed offset was dirty pool.

That liquidity trap would prevail was borne out by events, but it is also something that should have been known in 2009.  Moreover, and related, any fiscal expansion that forced the US out of liquidity trap would have been a success, virtually by definion, at least on the mainstream macro logic that these economists all claim to accept.

Delong has an irritating tendency not just to disagree with people but to imply that their disagreement with him reflects some sort of professional misconduct.  One should be more polite and extend the benefit of the doubt, arguably. But on the other hand, one has a limited numbers of hours in a day and days in a lifetime. So I actually value knowing when economists are full of shit and making it up. On this, opinions will vary.

That is all just by way of introducing my reaction to the very first sentence in THCW, which got my back up and inclined me to side with Delong, which – in fairness – I would have anyway.

Since the economic recovery began eight years ago, the rate of economic growth has averaged only two percent per year, the weakest economic expansion since World War II.

Strictly speaking, this sentence is true, because the average strength of an economic recovery or expansion is conventionally measured only while that upswing is ongoing.  And by this point in time of the “Bush” cycle the economy was collapsing, which on THCW reasoning does not count.

But there is another way to put this.  Right up until the economy started melting, yes it was stronger under Bush than Obama. Good to know. And right up until John Wilkes Booth assassinated Lincoln, he was a beloved DC actor.

Neither Bush nor Obama actually caused GDP.  But the way THCW choose just to describe the agreed facts, in their very first sentence, seems intentionally misleading to me. So, yeah, I can see why Delong is harsh.  I got his point after ONE sentence of THCW.

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Note that the chart above depicts the two weakest cycles in postwar era.  That these two weakest have been recent fits both THCW (anomalous) and Delong (trend).  Note also that I overlay the “Bush” cycle onto the time scale of the current expansion. By this “point” in the last expansion, it was over.  The data for Last Cycle are shown overlaid only to December 2016, because the next two observations are actually this expansion.