Sept. 17, 2004 — Q: Would you please explain why the Republicans keep saying they inherited a recession? How accurate is that statement?— Gary G., Sinking Spring, Pa.
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A: Like much of what you hear during this political season, there's a bit of truth on both sides. Let's look at the numbers:
Employment levels peaked in March of 2001 with 132.5 million American on non-farm payrolls – two months after Bush took office. So, if you go by the jobs data, the recession began on Bush’s watch.
That's one of the key statistics cited by the National Bureau of Economic Research, the private group that tracks business cycles. It’s widely regarded by economists as the arbiter of just when recessions begin and end. According to the NBER, the recession began in March, 2001.
But economic expansion doesn’t come screeching to a halt just because a new president takes office. The seeds of the slowdown were clearly in place. After nearly a decade of uninterrupted quarterly gains, the Gross Domestic Product shrank by 0.5 percent in the third quarter of 2000. (A slight drop in GDP doesn’t by itself, indicate a recession is near. But in this case, it seems to have foreshadowed the slowdown.) More important, perhaps, was the bursting of the stock market bubble. Measured by the S&P 500 index, the stock market peaked on Sept. 1, 2000 at 1520.77. Again, a stock market pullback -– by itself -– doesn’t indicate the start of a recession. But it’s often a pretty good predictor of an impending slowdown.
The real question is whether the Bush administration did everything it could to reverse the decline and get the economy back on track. For example, Bush has very appropriately blamed the terror attacks of 9/11 for sending the U.S. economy further into recession. But were those attacks preventable? If so, should the Bush administration bear some of the responsibility for not heading them off? (We'll let you decide the answer to that one.)
As with much of the debate in the current presidential campaign, these numbers probably won’t change too many minds. The record clearly shows that the recession began on Bush’s watch, even though there were signs it was coming during the last months of the Clinton administration. Whether the outcome would have been different with a Democrat in the White House is really unknowable.
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