I was reminded as I found a photo of the January 2001 CEA and staff, of how economic analysis has evolved over time in the White House.
In 2001, Martin Baily was an expert on productivity, including a path-breaking paper on implicit contracts in labor. Robert Z. Lawrence had written Can America Compete? Kathryn Shaw had written numerous studies of labor management and productivity. Chad Stone had coauthored an Urban Institute book on Reagan era economicc policies, and had been on CEA since 1996. The 2001 Economic Report of the President.
Kevin Hassett authored Dow 36,000, Tyler Goodspeed’s most well-cited article is Microcredit and adjustment to environmental shock: Evidence from the Great Famine in Ireland in the JDE. Tomas Phillipson has published widely on technology, inequality, and growth. Casey Mulligan, on leave from Chicago U., has been the topic of numerous posts on Econbrowser ( [1] [2] [3] [4] [5] [6] [7] [8] among others). The 2019 Economic Report of the President (note Goodspeed has replaced Burkhauser since March 2019.)
CEA in January 2001.
Update, 9:30PM 13 June: Ed Hanson writes:
A walk down memory lane, Jan. 2001, such a long time ago to remember.
Wasn’t that the time the US had already or was about to slip into recession. I do remember how the Democrats denied and denied the worsening economic situation during the Just ended national Gore campaign.
Unfortunately, as usual Mr. Hanson is the Master of Misinformation. Here are the latest available data on that period.
Figure 1: GDP, in bn. Ch.2012$ SAAR (blue, left scale), and nonfarm payroll employment, quarterly average of monthly data, in 000’s, s.a. (red, right scale). NBER defined recession dates shaded gray. Source: BEA 2019Q1 second release, May 2019 employment situation release, NBER, and author’s calculations.
Who’s that guy hiding around 10:00 ???
And although I often disagreed with him, the late Martin Feldstein, who just passed away the other day, proved that at one time Republican presidents were capable of finding talented and respected economists to head the CEA.
Mixed feelings about him as a person. I think Feldstein knowingly fudged on the truth sometimes. There’s no denying he had an extremely sharp mind though. Didn’t know he’d passed away.
Casey Mulligan – fiscal stimulus denier!
casey mulligan is a loser. when his “analysis” gets pointed out as incorrect, he simply ignores it and continues to promote his political hackery. he has the same level of integrity as stephen moore. both of them have found that conservative foundations pay handsomely for loudmouthed hacks.
Mulligan was one of the handful of economists who argued that the Great Recession was caused by workers suddenly having a shift in their intertemporal preferences for leisure. In short, we had the Great Recession because workers suddenly got lazy.
Dayum! If I had only worked harder, the company that ran out of work and laid me off would have kept paying me. Who knew! Where was Mulligan when we needed him? Taking a mulligan, I guess.
Here’s a better pic of the guy who’s working hard and carrying a big work load, but always hiding in the back:
https://clinton.presidentiallibraries.us/files/original/67a274dc6759ea812a1d58dce4831689.jpg
https://www.youtube.com/watch?v=ENEkPpdz2MQ
Menzie, haven’t you learned anything?? You save these ones with your face planted in front like Mount Rushmore and then when TSA is giving your Mom ____ at the airport you pull out the photo and say “Do I really need to call in the ‘serious guanxi’ here guys?? Are you gonna make me do that!?!?!?!”
A walk down memory lane, Jan. 2001, such a long time ago to remember.
Wasn’t that the time the US had already or was about to slip into recession. I do remember how the Democrats denied and denied the worsening economic situation during the Just ended national Gore campaign. Fortunately, the US voter was capable of determining what the current economic situation was despite the ‘experts’ and still capable of judging which economic policy being promoted was better to improve things.
Ed
Ed Hanson: Someday, instead of relying on your addled memory, you should look up the data. For your benefit, let me remind you NBER dated the recession starting March 2001 (photo was from January 2001, as I recall). I add a graph of data on real GDP and employment as of latest vintages, also for your benefit.
Boy, you are a mindless ideologue.
Menzie
It is good to read from you that recessions begin out of nowhere, and that economic policy of the past and present up to Jan 2001 had zero to do with the recession. But now knowing that, I find it strange that you have spent so much time lately, writing about how economic policy is the cause of a possible looming recession.
I guess another way of looking at is, it is good to know that all those indicators that in 1999 and 2000 indicating possible recession ahead were of no value because the economic team in place had everything under control back then. But the recession did happen, but no matter.
Two things Menzie. One, just be honest, at least with yourself, recessions do not occur out of nowhere. Poor or mistaken economic policy of the past and present do contribute to the cause of recessions, whether in 2000 or 2019. And two – Mindless, Idealogue possible, but nowhere in your league as an idealogue – however I am quite a bit older than you and no longer a boy.
Ed
PS. Nice choice of indicators you chose in your addendum. GDP flattening toward 2001, not quite true yet today in 2019 (can I assume that is a good thing today as you say it was in 2001?). Non-farm payroll rising up to 2001, as it is today in 2019 (again a good thing?). Where is your, “What me worry” face. But of course, other indicators back before 2001 were troubling, such as the Aruoba-Diebold-Scotti Business Conditions Index which Professor Hamilton often used.
Ed Hanson: Policy matters. In 2000, the CEA was trying to stop protectionist pressures (like now, steel), and encourage education and investment in high technology sectors (last ERP was on the New Economy). I was in the 2001 CEA as well under G.W. Bush. For better or worse, White House policy then included moving to steel tariffs, staying out of anything related to Enron and the traumatic blackouts in California, and fostering greater fossil fuel extraction. Also, for some reason, a low-level senior economist like me (and my boss at the time) was kept out of deliberations to bail out Turkey…go figure (although it was a mere two years before we invaded Iraq).
“It is good to read from you that recessions begin out of nowhere, and that economic policy of the past and present up to Jan 2001 had zero to do with the recession.”
Gee Ed – it is good to know you have never looked at short-term interest rates during 2000. Did you know that they started declining in the fall of 2000? Or do you think the lowering of interest rates caused the 2001 recession? I seriously ask as your comments are nothing but political hackery devoid of any economic reasoning.
Ed Hanson: Pretty remarkable point you make in your PostScript about using ADS for 2001 recession, given the ADS index was reported first in a 2009 paper (working paper in 2007).
You *are* funny though!!!
Sorry
The ancient computer I use could not open the underlining file so I just relied on this excellent source.
https://econbrowser.com/wp-content/uploads/2009/08/ads_aug_09.gif
Ed
Ed Hanson: Well, that’s not an ex ante prediction then…
When clicking on the above GIF the caption that goes with it is –
“Aruoba-Diebold-Scotti Business Conditions Index as reported on Aug 28, 2009, with NBER-dated recessions as shaded regions. Data source: FRB Philadelphia.”
And just a reminder, the GIF address is
https://econbrowser.com/wp-content/uploads/2009/08/ads_aug_09.gif
and it comes from this page
https://econbrowser.com/archives/2009/08/econbrowser_emo
Ed
Menzie,
Sometimes I can be embarrassed by what I do not know, but never so for what I learn. So I will ask a simple question. Do you berate your students and embarrass them for what they do not know, or do you celebrate what they learn. If your sessions here in Econbrowser are any indicator, reading all the derision, name-calling, and just plain impoliteness you both promote and tolerate, then it seems that you take more joy in what they do not know than what they can know. But never mind, you are what you are.
It was good to learn more about Aruoba-Diebold-Scotti Business Conditions Index, I thank you. So, the formal index did not exist Jan 2001. And if you simply look at the formal index it is about as useful as the NBER call of recession, way to late to do any good. But like NBER, the formal index relies on actual data, data that existed back in Jan, 2001 and the data itself was indicating a downturn. So when I read from your post just GDP (saar) and Non-farm employment as examples that all is well, the words “cherry picking the data” come to mind.
By the way, do you consider the Aruoba-Diebold-Scotti Business Conditions Index, now that it does exist, a rigorous and useful indicator?
A final note. Econbrowser has a world-class economist, James D. Hamilton, who has spent years working to make recession prediction useful by being timely. A version of which can be found on the front page of Econbrowser. You should refer to his work more.
Ed
Ed Hanson: My students are willing to learn and change gtheir opinions when confronted with new information. This characteristic I have *never* detected in your comments. Rather, a overweening dogmatism impervious to data seems to be your m.o. Hence, you deserve ridicule.
Ed Hanson: You do know the Econbrowser recession indicator (derived from a Markov switching model applied to advance GDP release data) is in the nature of a “nowcast”, or actually a retrospective indicator, in contrast to my use of term spreads as prospective indicators? Or did that point elude you? Perhaps too many polysyllables?
Menzie
You seem to think either what you bring here is new or that I have never heard it before. Neither is true. But you also miss my point of writing here. It is generally not aimed at the economist Menzie, but at the political Menzie, especially when the political Menzie encroaches of the economic Menzie. This post we are writing under is a near perfect example.
After months of proclaiming a possible recession in the near future due to current economic policy in general but now, specifically due to a poor economic advise team. Fine, it is your opinion, but you can’t stop there. Suddenly, you bring up the dream team of economic advisers around Jan. 2001. Again, if you stop there, showing your pride in that team, just fine, your opinion. But no. Conveniently forgotten is that dream team did not lead us to a possible near term recession, but to a verifiable real near term one. And when that was pointed out, your response was not a defense of the economic policy back then, but more akin to it did not happen on our watch, it was Bush. And then when it was pointed out that recessions and down terms never appear out of nowhere, you bring up some cherry picked statistics that says every thing was fine in Jan 2001. The fact is, you knew then and now that there were some very troubling indications of down turn at that time. And when I bring up ADS, your response is closer to “Hey, Dummy, ADS did not exist then” rather than although ADS hadn’t been published then, the underlying data it relies on were quite negative and concerning. The economist Menzie would both, correct the dating of ADS and explain that the underlying data did exist back then and was troubling. But political Menzie got into the way. The response was derision, disdain, and denial.
So anyway, ridicule away. I will return to reading your post until your duel personality gets too obvious again.
And finally, so,Dr Hamilton’s fine, innovating, and public work attempting to discover a useful recession indicator is just a now cast and by further implication by you, not very good. Especially, when compared to your genius. Well fine, your opinion. But you are quite wrong.
Ed
Ed Hanson:The distinction is that my students are generally willing to learn, and change views based on new information. You, in contrast, exhibit none of those abilities.
Ed Hanson You’re on reasonably firm ground is saying that in Jan 2001 the economy was “about to slip into recession.” And the NBER committee did revisit the beginning date of the recession, although the committee eventually decided to stick with the original dates. Still, reasonable economists (e.g., Greg Mankiw) argued that NBER should have pulled the beginning date forward. But where you’re clearly wrong is in misremembering what the “experts” were warning at the time. A lot of economists were concerned about the fiscal drag from large budget surpluses. The Fed’s decision to increase the FFR by 100 basis points within six months was widely questioned…especially the 50 basis point hike in May 2000. There was also a lot of concern over the “wealth effect” fallout from the dot com bubble. And the uncertainty surrounding the 2000 election probably didn’t help either.
Fortunately, the US voter was capable of determining what the current economic situation
Well, the voters actually went for Gore, remember? It seems that the lesson here should be that conservative SCOTUS justices are not good economists. In any event, while the economy might have been getting soft by Nov 2000, at that point there was nothing inevitable about the 2001 recession. And what we learned from the 2007 recession is that Republican presidents really don’t understand macroeconomics. After 8 years of Bush we were no better off than we were in 2000.
There’s an economic growth point that has been a reliable predictor of election results. Or was. I don’t remember then specific number, exactly. 3.4% or so. As I recall, the growth rate in 2000 was right on or very close to the number, which resulted in a close election. I also recall that it was not as close in 2016, and Hillary won the popular vote, as predicted by the growth figure. In both 2000 and 2016, quirks in the electoral college and localized growth rates meant that the voters’ overall opinion was not reflected in the outcome. Here we are again. My expectation is that the growth rate will be below the magic number, whatever it is these days, by enough that Trump will be a one-termer.
Back to recessions and 2001. The impending recession did, in my opinion, have an effect. The general populace smells bad times coming long before the numbers reflect what they already know. My general rule of thumb is that a recession has hit when the denials that we are in a recession get loudest. When the press and others start to admit that maybe, just maybe, we are in a recession, then we are beginning to climb back out of it. The anomaly was the Great Recession which was far deeper and longer than any recession or series of recessions since the early 1980s. At least from my completely non-academic vantage point in the commercial building construction industry.
This history of presidents winning the popular vote but not the Electoral College is an unhappy history. Hayes (1876), Benjamin Harrison (1888), G. W. Bush (2000) and Trump (2016) all rate in the bottom third according to the latest American Political Science Association poll. The one exception is John Quincy Adams (1824), although that’s a special case because the popular election meant something quite different back then. And even at that, John Quincy Adams does no better than mediocre.
The clearest warning sign of the impending recession and since widely viewed as a major cause of it was the end of the dot.com bubble, mentioned in passing by 2slugbaits. But it seems to have been quite important, and its peak had hit in March, 2000, so the stock market had been falling for nearly two thirds of a year by November, an umpleasant undertow, even as its effets on the real economy had not shown up yet. That effect was largely a major decline in capital investment, i believe, notably in the high tech sector, big surprise, which had been driving mush of the earlier boom, although I stand to be corrected by those examining data super closely.
Nevertheless, Gore did win the popular vote by a narrow margin in the end, although Bush had been narrowly leading him in the polls just before the election.
“the US voter was capable of determining what the current economic situation was despite the ‘experts’ and still capable of judging which economic policy being promoted was better to improve things.”
Ah yes – revisionist history as to why Bush43 pushed his tax cut for the rich. OK, AFTER the recession started Mankiw said we needed the tax cut to stimulate consumption. Then again Hubbard and Lindsey was pushing this tax cut on the premise that it would raise private savings. Why BTW Ed (since you don’t get basic economics) means they were predicting less consumption not more. So many reasons for a tax cut, so little time. Sort of like all the conflicting reasons to invade Iraq 2 years later!
Slug
A short mild recession after the dot-com bust could reasonably be regarded as an excellent result and the economic policy of the time could be thus defended. But Menzie chose the ‘not on my watch’ approach as if the recession just magically appeared during the Bush era long before any Bush policy had any affect. I was just trying to point that out.
And the ‘experts’ I was writing about were the democrat political ones, not economic ones (thus the quote marks) who throughout the campaign insisted the economy was golden. The outcome of that election should be a lesson to all, economic issues are always at the top of voters concerns, and those voters have a real understanding of the direction the economy is heading. And remember the shameful lack of Clinton cooperation for the transition. That had much to do with the inevitability of the recession.
Other comments.
No, the voters went for Bush, the country was still a republic.
“2007 recession is that Republican presidents really don’t understand macroeconomics” not quite, what was shown was that Bush did not understand macro.
It could just as easily said the economic crisis of the late 70’s and early 80’s showed that democrats don’t understand macro, but the truth is it was Carter who did not understand. But the real lesson is that most politicians do not understand macro, those in Congress especially. And it is fortunate that understanding macro is not terribly important, because those who think they can manipulate macro by government action and edict are the ones who inevitably cause the worse damage. Give me a politician who understands that the best policy is to reduce the restraint on the economy imposed by government, and I do not care if that President could utter a single academic word about macro, That innate good sense is enough. Once in awhile we really get such Presidents. Harding-Coolidge , Reagan, and so far, Trump. Clinton came close but through a different portal. He did not understand the need of restraint on the government, but he had an excellent regard for the voters who do have a strong sense when government interference in the economy needs to be cut.
Ed
Ed Hanson No, the voters went for Bush,
Hmmmm….
Gore: 50,996,582
Bush: 50,456,062
Nader: 2,882,955
Maybe you learned that “new math” that we used to hear about, but by my reckoning more voters went for Gore.
That’s probably the first time I ever came across someone claiming that Harding was a great president with “innate good sense.” If you liked Harding and Coolidge, then you probably loved Franklin Pierce and James Buchanan.
Slug
I guess it is civics lesson time.
The process of electing the President within the United States of America can perhaps be best described as 51 separate elections. The 50 states and Washington DC each have a separate democratic election to send from each their allotted number of votes to the electoral college. The winning candidate is the one receiving the most electoral votes as long as it its greater than 50% of the total. Look it up Slug, the details get better. And perhaps you will discover that there is no nationwide popular vote for President. And just maybe come across the word that you can never seem to remember or understand; Republic.
As for Harding, he began the great reduction of tax rates which were so high it had thrown the US into a horrendous post war depression. He began the historic payoff of the national debt. Coolidge took over after his death and was an even better and a stronger Constitutionalist.
Never used the word “great.” If I had I would have limited it to Coolidge and Reagan. Clinton and Harding do not reach that standard.
Ed
Civics lesson from the vague fool who write this?
“A short mild recession after the dot-com bust could reasonably be regarded as an excellent result and the economic policy of the time could be thus defended.”
Try a history lesson as well as some actual economics. As I already stated, the FED was already lowering interest rates before the recession began. So any lame excuses for the Bush43 tax cut are just that – lame. Yea – I made this point before and you choose to ignore. The classic definition of a troll.
Ed Hanson I didn’t say we picked our presidents by popular vote, I was simply correcting your implication that the voters chose Bush. They didn’t. The Electoral College chose Bush, not the voters. Or to be more precise, the SCOTUS chose the Electoral College, which then chose Bush.
And just maybe come across the word that you can never seem to remember or understand; Republic.
“Republic” comes from the Latin “res publica”. It means “public thing”, as opposed to a private thing such as a monarchy (e.g., “Her Majesty’s Court” or “Her Majesty’s Government” which refer to the possessive). Both the US and the old East Germany were republics, as were the old soviet republics, but I don’t think you would say they had much else in common. As part of your continuing civics lesson let me recommend Robert Dahl’s “On Democracy”, which contains an extended discussion of the origin and evolution of the terms “democracy” and “republic.” Dahl has a lot to say about James Madison’s linguistic sleight of hand.
https://www.amazon.com/Democracy-Yale-Nota-Bene/dp/0300084552
As to the 1921 recession, you’re wrong about its origin as well as how “horrendous” it was. It’s an oldie but goodie, but Christina Romer demolished that myth over 30 years ago. See her “Existing Estimates, New Estimates, and New Interpretations of World War I and its Aftermath.”
https://www.nber.org/papers/w2187
Too bad Amity Shlaes never read it. It might have saved her from writing a lot of economic nonsense.
“The Electoral College chose Bush, not the voters. Or to be more precise, the SCOTUS chose the Electoral College, which then chose Bush.”
After the Nov. 2000 election. Gore had 266 Electoral Votes as compared to 246 Electoral College Votes. Florida’s 25 were tied up in litigation after litigation. The state courts finally came to the sensible idea that all 67 counties would undergo a recount of the votes. Team Bush feared that this recount would give Gore the remaining 25. So they took this to the Supremes where they won 5-4.
Now if Ed does not know this – he is really stupid. If he does know this – he is nothing more than a lying troll,