The recession hype

Commentary: The downturn was never as dire as the rhetoric.

It was supposed to be the economic equivalent of shock and awe, bombs falling everyplace, an explosion at every turn.

"The current financial crisis in the U.S. is likely to be judged in retrospect as the most wrenching since the Second World War," said no less a titan of economic forecasting than ex-Fed chairman Alan Greenspan, and fewer voices were raised in protest of this gloom-and-doom vision than in hysterical concurrence.

So, the question is, what happened to this recession that was slouching toward us, waiting to be born as something dreadful and unconquerable? According to a recent page-one story of The Wall Street Journal, we may have ended up with a different situation entirely, a slowdown that falls short of a recession.

To be sure, the Journal piece stops well short of saying everything is hunky-dory. Consumer confidence is down, oil and food prices are up, jobs are in fact being lost, productivity is below normal, and worse possibilities still lurk in the shadows.

But any number of competent economists are far less concerned about approaching calamity than they were, the Journal reports, while pointing to a number of relatively positive signs, such as retail sales that are climbing if you leave out autos, of actual though meager GDP growth in the past quarter, and of a job problem that is not nearly so bad as you would expect if we were caught up in a recession like those of the past. The indicators just aren't indicating disaster.

Maybe federal action helped keep the worst from happening. The story says economists give credit to the Federal Reserve's rescue of Bear Stearns, its interest rate reductions and even those government checks sent to citizens across the land. But maybe, too, the downturn was never as dire as the rhetoric about it. Maybe fear has been generated not just by economists who misunderstood what was coming, but by politicians hoping to capitalize on bad times and by news outlets given to overstated, unbalanced and politically biased reporting.

In a newspaper commentary in April, John Lott, a research economist at the University of Maryland, reminded us of how Barack Obama and Hillary Clinton announced the certainty of the country's being in a recession when the evidence was to the contrary, and explores media partiality on the issue. He notes how news outlets have paid scant attention to periods of exceptional growth under the Bush administration, and how they have given more attention to a possible recession recently than to a real recession at the end of the Clinton administration.

Alan Reynolds of the Cato Institute, says the kind of financial crisis we have lately seen has never precipitated economic mayhem.

The Journal story reports that Greenspan himself has come around to predicting nothing more than an "awfully pale recession," which could in fact be our lot - there's no such thing as an economy that suffers no setbacks, although there is such a thing as an American economy that has afforded people more widespread and persistent affluence than anything previously known in history, and that has many more good days than bad.

Jay Ambrose writes for Scripps Howard News Service.