Thursday, August 28, 2008

Charlie Sykes, economic illiterate

Charlie Sykes, desperate to spin the economy as being healthier than it is (he clearly remembers that "It's the economy, stupid" rendered George H.W. Bush, a better man than his son, a lowly one-termer), hailed the upward revision for second quarter gross domestic product today. The initial estimate pegged GDP growth at 1.9%. The revision put it at 3.3%.

Now, let's leave aside for the moment the fact you can't eat GDP and there are questions about its value as an indicator of overall economic health. Or the fact that government stimulus checks were a significant driver of personal consumption isn't something that should warm the invisible hand of a supposed free marketeer like Charlie Sykes. Or the fact that quite a few economists are dour about the outlook for the remainder of the year as the mortgage crisis steps into a new phase and financial institutions are holding liquidation sales on their assets.

Leave all that aside. The thing that marks Charlie Sykes as an economic illiterate is that when he tried to explain what a recession was to his listeners he said it was economic contraction (not his words) for "a number of quarters." A "number"? Try two consecutive ones. Shouldn't Charlie know that? One might think that Charlie is being deliberately obfuscatory (i.e., should the next quarter go south Charlie can say "Nothing to see here, it's only one quarter, a recession is a number of quarters of contraction.") But the Brawler isn't sure. He recalls Charlie earlier this year defining a recession as three quarters of contraction.

And, of course, the two consecutive quarters of decline isn't technically the definition of a recession anyway. At least not according to the National Bureau of Economic Research, which, after all, calls recessions.

From the NBER web site:

Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. The most recent recession in our chronology was in 2001. According to data as of July 2008, the 2001 recession involved declines in the first and third quarters of 2001 but not in two consecutive quarters. Our procedure differs from the two-quarter rule in a number of ways. First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in economic activity." Second, we use a broader array of indicators than just real GDP. One reason for this is that the GDP data are subject to considerable revision. Third, we use monthly indicators to arrive at a monthly chronology.

So, Charlie, who's fond of talking about "unintended consquences" and pretends to know how markets work, reveals himself as a buffoon to anyone who listens. But you already knew that.


  1. I think it unbelievably funny that you can't claim a recession. In fact, you won't be able to claim a recession alllll the way through the election.

    I'm sure you'll find several other ways to proclaim America sucks, though. 'Tis a part of being a member of your party.

  2. Then you need to find a new sense of humor.

    Are you proud to "claim" flatlining real median income?

  3. Aw Cindy, I'm sorry to see you bring out the "Democrats hate America" talking point. I thought you were better than that.

  4. Then Zach, say something nice about the way things are going every once in a while. Tell me why Obama is a better choice than McCain without invoking 1) America sucks, or 2) Bush/McCain. It doesn't feel like you can win without one of those two, so you keep pounding them.

    America does NOT suck, and McCain is NOT Bush. I dare you to use something new.

    And BCB - there have been a few other times in America's history where inflation, and thus a "flatling" income was a wee bit of a problem. Wasn't a Democrat in charge of a couple of those?

  5. Cindy: As the chart clearly shows, real median income for heads of households aged 35-44 nosedived at the beginning of Bush's term (not his fault) ... and despite Bush's unleashing of the market it stayed well below its previous peak for the rest of the decade. Much of which was a low-inflation environment.

    Your "inflation" response is about as responsive/relevant as your "America sucks" nonsense. And "McCain is NOT Bush"? Please. McCain's voting record speaks otherwise. His "emergency room" health care plan is as bad and his foreign policy instincts are worse.

  6. BCB, obviously we won't be agreeing anytime soon. Keep in mind that Obama has voted with McCain 90% of the time, too, even with his very short voting experience.

  7. Chuck should know by now that when the contractions start coming closer together something new is about to be born.

  8. My friend created a new Facebook page to hopefully get us a more left leaning talk radio station in Milwaukee so there's some damn balance finally!! Everyone please join: