"The worst economic crisis since the Great Depression"


That's how Barack Obama assessed the economy during his infomercial last night. Do the latest economic numbers back his alarmist, quasi-Bushian claim? Not quite:

The U.S. economy shrank at a 0.3 percent annual rate in the third quarter, its sharpest contraction in seven years […]

The third-quarter contraction was a striking turnaround from the second quarter's relatively brisk 2.8 percent rate of growth.

Seven years, 70 years, whatever. Ah, but there are worse signs than mere GDP:

Consumer spending, which fuels two-thirds of U.S. economic growth, fell at a 3.1 percent rate in the third quarter—the first cut in quarterly spending since the closing quarter of 1991 and the biggest since the second quarter of 1980. Spending on nondurable goods—items like food and paper products—dropped at the sharpest rate since late 1950.

Getting warmer!!

The GDP report showed that disposable personal income dropped at an 8.7 percent rate in the third quarter—the steepest since quarterly records on this component were started in 1947—after rising 11.9 percent in the second quarter when most of economic stimulus payments still were flowing.

Finally, a number that could be the worst on record since the Great Dustbowlia, though it's a number of direction, not position, and (just like GDP) when combined with the prior quarter it shows net growth.

I don't mean to minimize the pain here. But as Nick Gillespie pointed out a couple weeks back, "Any comparison with the Depression, which featured an unemployment rate of 25 percent and a contraction in GDP of over 33 percent at its worst moments, strains credulity."

Both the outgoing administration and the incoming one (whichever wins) have been using such inaccurate, scaremongering analogies to justify massive, ill-conceived federal interventions all over the private economy that will likely have profoundly negative long-term consquences in the forms of renewed inflation, managerial inefficiency from central planners, offshoring of capital markets, and what I fear will be the biggest Bubble of them all: Having the federal government guarantee damned near every large financial risk anybody takes. In a world of ever-increasing guarantees, why shouldn't every investor pour maximum money into whatever federally backstopped financial institution is offering the highest rates? And how do you suppose said institution will be able to afford paying out those high winnings? It won't be through sound investments, boyo.

As a confirmed apocalyptic, I continue to expect the sky to fall; but as a stat dweeb I'm just not seeing the elephant tracks. Right now, during our Worst Economic Crisis Since the Great Depression, unemployment is at 6.1 percent, inflation is at 4.9 percent, and GDP shrank 0.3 percent this quarter, though it's still up for the year. I don't see how that even begins to compete with the late-Carter, early-Reagan era, when GDP shrank in both 1980 and 1982, unemployment never dipped below 8 percent from November 1981 to January 1984, and inflation never dipped below 8 percent between September 1978 and January 1982.

One big difference between that Next Great Depression and this one: Washington, in the form of Reagan and Paul Volcker, was forcing us to swallow our medicine to whip inflation and create conditions for future growth. Nowadays the only government medicine being doled out is temporary pain relief