White House Tries to Redefine ‘Recession’ as US Economy Bound to Contract for Second Quarter in Row
President Joe Biden speaks at the North America’s Building Trades Unions (NABTU) Legislative Conference at the Washington Hilton in Washington, April 6, 2022.
Tim KorsoAs the publication of the economic report for the second quarter draws nigh, the US administration is apparently mobilized to prepare the US public for far-from-great financial results. US Treasury chief Janet Yellen already disputed a notion that a contracting economy equals “recession”.The White House is scrambling to try and redefine what constitutes a recession ahead of the publication of the GDP data that is expected to be in the red again, following a decline in the first quarter.The US economy contracted by 1.4% in the first quarter and is projected by Atlanta’s Fed to lose another 1.6% in the second. Atlanta Fed projections often turn out to be close to the final numbers.The US administration argued on its official blog that even a negative GDP growth in the second quarter in the row is “unlikely” to mean that the US economy is in recession. This notion contradicts the benchmarks often used by economists and by some of the previous US administrations, which declares recessions after two consecutive bad quarters.The National Bureau of Economic Research, in turn, offers a more flexible definition, arguing that recession can be considered a “significant decline in economic activity that is spread across the economy” that lasts for “a few months”. The same bureau also names inflation-adjusted income, employment numbers, public consumption levels and the tempo of industrial production as parameters to be considered before diagnosing a recession.
Treasury Secretary Yellen Admits Inflation ‘Unacceptably High’ as Rate Breaks 40-Year Record14 July, 18:40 GMTBiden’s administration seem to be keen on using the parameters mentioned by the National Bureau of Economic Research to prove that the US is not in recession – a term that might further undermine the Democrats’ positions ahead of 2022 midterms. The White House argued in the blog that consumption, production and employment are as high as one can only dream of, and hence the economy is allegedly not in trouble, despite inflation exceeding 9%.US Treasury head Janet Yellen relied on a similar explanation as she insisted that what the US economy had been witnessing was not a recession but a “slowdown” after unusual post-pandemic rapid growth in 2021.”We have a very strong labor market. When you are creating almost 400,000 jobs a month, that is not a recession,” Yellen insisted in her interview with the NBC.However, not everyone fell for the White House explanations of the economic recession in the country.Republicans, who are keen to recoup control over the Congress in the upcoming election, rushed to accuse President Biden, the Democrats and their decision to push through an extra COVID-aid package and other spending in 2021 over the current economic woes in the US.”Redefining the word will not fix the fact that Democrats wasted $1.9 trillion, resulting in skyrocketing costs for Americans. This further underscores how out-of-touch Biden and Democrats are with the pain families are feeling,” GOP National Committee spokesman Will O’Grady stated in an interview with Fox News.The White House still does not lose hope of reigning in inflation, but so far its strategy has been solely relying on raising interest rates. Rates have already been ramped up to nearly 2% by the Federal Reserve and are scheduled to be upped by another 0.75% in the coming days. The Fed hopes that the measure will eventually slow down the “overheated” economy, as is usually the case with high interest rate, causing inflation to drop as well. However, so far, the method had no effect in the US.
