Is the Recession Really Over? The NBER Seems to Think So...
Unless you’ve been buried under a pile of stock market profits over the past 24 hours unable to breathe or reach your TV set, you know the National Bureau of Economic Research (NBER) – the nonprofit body based in Cambridge, Mass., that has been assigning dates to recessions since…1929 – declared the Great Recession over and done with in June 2009.
Total duration of the Great Recession: 18 months, eclipsing the previous postwar record of 16 months set in 1973-75, and again in 1981-82.
Although, “economic activity is typically below normal in the early stages of an expansion,” navel gazers at the NBER reluctantly admit, “it sometimes remains so well into the expansion.”
How did the ‘recovery’ such as it is come about? Let’s take a look at the nittys:
- Government spending grew from 20.6% of GDP at the start of the recession to 25.4% in the second quarter of this year, according to the Commerce Department’s Bureau of Economic Analysis
- Increasing transfer payments – 99-week unemployment benefits, etc. – account for 73% of that growth. At least with the New Deal we got some bridges and dams to show for it. Now Uncle Sam just pays people to sit at home, eat Cheetos and watch Jersey Shore
- In contrast, gross domestic private investment has shrunk from 17.3% of GDP at the start of the recession to 11.3% last year.
And a good portion of that last figure goes just for repair and maintenance of the existing capital stock. Investment in new factories and equipment – i.e., real growth – represented 40% of gross domestic private investment in 2006.
Last year, capital investment was a mere 3.5%.
“Thus,” concludes Independent Institute scholar Robert Higgs, “net private investment did not simply fall during the recession; it virtually disappeared.”
So much for a productive recovery and worthwhile use of stimulus money. No chance of a double-dip recession after all that paper cash flushed down the toilet.