This article is from the source 'nytimes' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.nytimes.com/2016/10/28/upshot/will-the-next-president-face-a-recession-dont-assume-so.html
The article has changed 4 times. There is an RSS feed of changes available.
| Version 1 | Version 2 |
|---|---|
| Will the Next President Face a Recession? Don’t Assume So | Will the Next President Face a Recession? Don’t Assume So |
| (about 7 hours later) | |
| The economic expansion that has been underway in the United States since 2009 is getting old, and soon will die. | The economic expansion that has been underway in the United States since 2009 is getting old, and soon will die. |
| At least that’s the conclusion you would reach from various news media prognostications about the economic environment that the next president will face. | At least that’s the conclusion you would reach from various news media prognostications about the economic environment that the next president will face. |
| “The next president will likely face a recession,” said a CNN headline. “Recession May Loom for Next U.S. President No Matter Who That Is,” said a Bloomberg headline in May. New York magazine was at least generous enough to frame the coming recession in the Clinton or Trump administration as an open question. | |
| These prognostications could turn out to be right, of course. The economy faces all sorts of risks and threats, any of which could lead to a contraction. But the fact that the current expansion is more than seven years old — “long in the tooth,” as commentators have often observed — reveals almost nothing about the likelihood of a contraction during the coming four years. The idea that it would is rooted in a faulty metaphor, and isn’t backed by modern economic history. | |
| It’s tempting to think of an economic expansion as being like a life span. The older you get, the closer you are to death; a 95-year-old probably has fewer years left to live than a 60-year-old. But this year Glenn D. Rudebusch, an economist at the Federal Reserve Bank of San Francisco, looked at the evidence from post-World War II United States economic expansions, and didn’t find that pattern held up at all. | |
| “A long recovery appears no more likely to end than a short one,” Mr. Rudebusch wrote. “Like Peter Pan, recoveries appear to never grow old.” | “A long recovery appears no more likely to end than a short one,” Mr. Rudebusch wrote. “Like Peter Pan, recoveries appear to never grow old.” |
| Expansions don’t die of old age. They die because something specific killed them. It can be a wrong-footed central bank, the popping of a financial bubble or a shock from overseas. But age itself isn’t the problem. | |
| A look around the world also shows plenty of examples of expansions that have lasted a lot longer than either the seven years the current United States expansion has been underway or the longest expansion in American history, from 1991 to 2001. | A look around the world also shows plenty of examples of expansions that have lasted a lot longer than either the seven years the current United States expansion has been underway or the longest expansion in American history, from 1991 to 2001. |
| Britain had a nearly 17-year expansion that lasted from the early 1990s until the 2008 global financial crisis. France had a slightly longer expansion that ended in 1992. And the record-holders among advanced economies in modern times, according to the research firm Longview Economics, are the Netherlands, which experienced a nearly 26-year “Dutch miracle” that ended in 2008, and Australia, which has an expansion that began in 1991 and is on track to soon overtake the Dutch for the longest on record. | |
| Will a President Hillary Clinton or Donald Trump face a serious economic downturn or a recession in the next four years? Quite possibly. The Federal Reserve could make a mistake, either raising interest rates too quickly, stopping the expansion in its tracks, or raising them too slowly and then needing to move abruptly to combat inflation. A new financial crisis could emerge; some shock we can’t even imagine might stop this expansion cold. | Will a President Hillary Clinton or Donald Trump face a serious economic downturn or a recession in the next four years? Quite possibly. The Federal Reserve could make a mistake, either raising interest rates too quickly, stopping the expansion in its tracks, or raising them too slowly and then needing to move abruptly to combat inflation. A new financial crisis could emerge; some shock we can’t even imagine might stop this expansion cold. |
| There is a decent argument that the United States economy is more susceptible to recession now than it has been for most of the last several decades, for two reasons. | There is a decent argument that the United States economy is more susceptible to recession now than it has been for most of the last several decades, for two reasons. |
| First, growth has been around 2 percent a year, below the 3 to 4 percent that was commonplace in the second half of the 20th century. That means there is less of a growth cushion. It takes a smaller negative shock to pull the economy into contraction territory. | First, growth has been around 2 percent a year, below the 3 to 4 percent that was commonplace in the second half of the 20th century. That means there is less of a growth cushion. It takes a smaller negative shock to pull the economy into contraction territory. |
| Second, the Fed may find itself with less room to reduce the damage of the next downturn. In modern recessions, the central bank has cut rates by an average of 5.5 percent, according to research by the Fed economist David Reifschneider. With rates below 0.5 percent and on track to rise very slowly, any small shock in the next few years could cause major economic damage, especially if the Fed’s less conventional monetary policy tools either go unused or don’t prove effective. | Second, the Fed may find itself with less room to reduce the damage of the next downturn. In modern recessions, the central bank has cut rates by an average of 5.5 percent, according to research by the Fed economist David Reifschneider. With rates below 0.5 percent and on track to rise very slowly, any small shock in the next few years could cause major economic damage, especially if the Fed’s less conventional monetary policy tools either go unused or don’t prove effective. |
| But those are separate issues from the more general idea that “we’re due” for a recession, and they’re also issues that have been present for all seven years of the current expansion. | But those are separate issues from the more general idea that “we’re due” for a recession, and they’re also issues that have been present for all seven years of the current expansion. |
| It’s true that we’re closer to the arrival of the next recession than we were a year ago. But that’s tautological. We’re also a year closer to the destruction of the earth by the sun, or to a Cleveland Browns Super Bowl title. | It’s true that we’re closer to the arrival of the next recession than we were a year ago. But that’s tautological. We’re also a year closer to the destruction of the earth by the sun, or to a Cleveland Browns Super Bowl title. |
| And there’s no particular reason to think either of those are going to happen during the next presidential administration either. | And there’s no particular reason to think either of those are going to happen during the next presidential administration either. |