“The economy sucks.”
That sounds like a statement you would hear from someone who was just laid off or lost his home, but not something you would see in a reputable weekly news magazine.
But this time, it was just part of a headline for a one-sided, pro-Bill Clinton view of the economy that appeared in the January 21 issue of Newsweek [1].
The article, by Daniel Gross, evoked the memory of the 1992 campaign, one in which Democrat Clinton defeated incumbent Republican George H.W. Bush by portraying the nation’s economic state as substandard.
“Not since James Carville helped Bill Clinton take the White House 16 years ago by reminding him ‘it's the economy, stupid,’ has the nation's economic state played such a key role in a presidential campaign,” Gross wrote.
So why does the economy “suck,” according to Newsweek? It isn’t that the economy is in recessionary times, but that it is “perilously close to sliding into a recession.”
“Today, the nation is perilously close to sliding into a recession; in '92, the economy had already started growing, though a jobless recovery doomed George H.W. Bush’s re-election bid anyway,” Gross wrote. “The lesson? Voters’ perceptions matter more than whether the economy is technically expanding or contracting.”
But with any downbeat report, there is another side – which was missed by Gross and it doesn’t imply “the economy sucks.”
Recent reports from The Wall Street Journal [2] and Bloomberg [3] indicated a majority of economists they surveyed think the economy will be spared of a recession. The Wall Street Journal indicated economists thought the economy had a 42-percent chance of experiencing a recession, and the Bloomberg survey indicated economists put the likelihood of a recession at only 40 percent.
Gross offered only a few glimpses of what is right with the economy, but did not find anyone who thought the economy would stave off a recession.
So what should be done? Gross offered two schools of thought, both involving government intervention, making “the need for” economic intervention a political issue.
“From Wall Street to California, eyes are turning to Washington for help,” Gross wrote. “Government responses to recessions come in two forms: fiscal policy (stimulus packages) and monetary policy (lowering interest rates). As the primaries roll into economically depressed Michigan, the need for the government to stimulate the economy – through tax breaks or increased spending – has become a hot political issue.”
Gross is no stranger to government involvement in economic issues. In July 2007, Gross played the class-warfare card in a Newsweek article [4] about regulating private-equity firms – what he called “the new Masters of the Universe.” Gross questioned whether these successful entrepreneurs paid enough in taxes.