It's official: We're in a recession

Remember when Phil Gramm said Americans were a "nation of whiners"? He was wrong. The recession started last December.

Published December 1, 2008 7:24PM (EST)

Tell us something we didn't know. The National Bureau of Economic Research, the organization that "officially" decides when recessions begin and end, has finally declared what most of us have suspected for quite some time. The United States economy is experiencing a recession.

What may surprise some people is NBER's announcement that the recession started way back in December 2007. How can that be? In the second quarter of 2008, the economy grew at a rate of 2.8 percent. We still haven't experienced two consecutive quarters of negative GDP growth, which most people believe is the quantitative measure that defines a recession.

But most people are wrong. As the NBER notes in its statement, "A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion." Using a variety of criteria, the NBER has now decided that the peak occurred in December 2007.

As for the trough? Your guess is as good as the NBER's. They don't do forecasts. And we're not there yet.

But here's the fun part. Although I did my best do ignore economic news last week, it was impossible to avoid the showdown between Amity Shlaes and Paul Krugman over whether FDR made the Great Depression worse, or led us out of the morass with the New Deal. I'll dig into that ever popular parlor game between left and right economists later this week. But meanwhile, Barry Ritholtz reminds at the Big Picture that back in July, Amity Shlaes defended Phil Gramm's "nation of whiners" comment by arguing that the former senator was correct to say that Americans were only experiencing a "mental recession." Her reasoning was that since the U.S. hadn't experienced two consecutive quarters of negative GDP growth, the U.S. wasn't actually in recession.

Most of us who were paying real attention to the economy this summer thought such a line of argument was silly. One can even argue that Barack Obama was elected president of the United States in large part because it was clear that McCain and his advisors were willfully ignoring just how big a ditch the economy was driving into. But the footnote to today's NBER announcement is that we can now definitively say that Shlaes was wrong, back in July. Her understanding of current economic affairs proved embarrassingly limited.

And this is a person we're supposed to take seriously as she attempts to rewrite the history of the 1930s?

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Globalization Great Recession How The World Works U.s. Economy