Despite claims that this recession has been mild, the stunning fact is that by the end of 1991, the economy will almost certainly have grown more slowly under George Bush than in the first three years of any other President since World War II.
Even if the widely heralded recovery dawns in the next few months--and this is increasingly in doubt--President Bush's economy will only slightly outpace the performance in the first three years of the Reagan Presidency, the worst showing until now. More likely, the growth will be lower, though the early 1980's saw the lower, though the early 1980's saw the steepest recession in the postwar era.
Mr. Bush is surely paying for the excesses under his predecessor. But three years is plenty of time to hold a President responsible for the economy's performance. And this Administration has claimed that nothing is fundamentally wrong.
The numbers show otherwise and should provoke discussion about fundamental changes in economic policy, including a move toward priming the pump, a current taboo. In fact, growth in the Bush years will very likely turn out to be slower than that in any consecutive three years since 1945 with only one exception--the three years that included the overlap of the Carter recession and the Reagan downturn.
The emphasis on outdated words like recession and recovery has helped obscure how poorly the economy is performing and enabled economists and the media, unwittingly or not, to put a better light on conditions than they warrant. The nation had been close to a recession for 15 months before its official start in mid-1990. Many regions had been in a full-fledged slump for some time, and the growth of the real G.N.P. (discounted for inflation) had been crawling ahead since early 1989, shortly after Mr. Bush took office. Now many economists are forecasting an early recovery, though overall growth is rising imperceptibly.
But recovery no longer implies that the problems have been solved. We need a new vocabulary. Nothing fancy--"stagnation" will do.
Should growth continue at its current rate to the end of 1991, Mr. Bush's economy will have eked out a total rise in G.N.P. of 2.8 percent over his three years in office. Reagan produced slightly more growth by the end of his third year in 1983, despite the severe recession. In the unlikely event that growth does takes off, the Bush record will still fall well behind the economy's performance under Richard Nixon. President Nixon also endured a recession in his first three years but it was truly mild, with overall growth topping 5 percent.
The economy in the first three years of other Presidencies expanded much faster: 8 percent under Dwight Eisenhower; 16 percent under Lyndon Johnson; 13 percent during the Carter Administration, and, if John Kennedy were given credit for a third year, 12.5 percent from 1961 through 1963.
Some argue that the Reagan recession paved the way for fast growth afterward. After a slow start in the early 80's, G.N.P. was up nearly 27 percent when he left office--aided amply, of course, by deficit financing. But when the Bush record is added, for which Mr. Reagan should shoulder much of the blame, the gains are far less impressive. The real G.N.P. will be up nearly 30 percent over the combined 11 years of the Reagan and Bush Presidencies. But it was up almost 50 percent from 1961 through 1971, during the Kennedy and Johnson Administrations and President Nixon's first three years.
We are at last seeing the hard evidence that there is a price to be paid for the free-wheeling 80's. Government deficits, bad loans by S & I's and banks, and speculation in takeovers, leveraged buyouts and junk bonds added artificially to spending and growth. The losses will be taken out of our hides in the 90's.
The conventional wisdom is that nothing can or should be done about it. The White House has not challenged a stubborn Federal Reserve for keeping interest rates too high. Warnings about inflation's return are taken seriously though it is nowhere in sight. Too many people believe in the old witchcraft that a dose of pain--especially unemployment--is all we need to right the economy.
If the recession of 1990-91 had been sharp, rather than drawn out, the dramatic stall in growth would have raised alarms. And even a Democratic Party in disarray would have made more hay out of the facts. Instead, the Democrats look to issues of fairness while ignoring the opportunity to rally around what has traditionally been their most most successful issue--the loss of prosperity.
Even a Republican economist tells me she has rarely seen so narrow a debate in Washington over how to handle the economy. Where is the cry for big public spending programs? Change the name to government investment, I would add, and start getting Americans to understand what a payoff the right kind of public spending could have. Perhaps a clearer understanding of how badly the economy has performed under President Bush will help open the lid on serious discussion. But why do I doubt it?
Jeff Madrick, business correspondent for NBC's 'Sunday Today,' is author of several books on finance.
(text of August 14, 1991 New York Times article)
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