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A recession by any other name is still not very rosy

Published Nov. 19, 1991|Updated Oct. 14, 2005

President Dwight D. Eisenhower stood before his Cabinet on March 12, 1954, and warned that a recession was coming. But don't call it that, Ike urged. Call it a "rolling readjustment." Presidents get nervous about the word "recession." George Bush is in good company in first insisting that one wasn't coming, and now insisting that what wasn't coming has since come and gone.

Alfred Kahn knows all about it. As Jimmy Carter's inflation fighter in 1978, he suggested that unless harnessed, inflation could bring on a depression.

The White House asked Kahn to quit using that word.

Next time out, Kahn used "banana" instead. He talked about The Great Banana of 1929. He said if inflation weren't brought under control the nation might be in for a big banana.

"Depression" itself was coined by Herbert Hoover. He thought it sounded better than the word then in use: "panic."

When a delegation of businessmen pleaded to him for a public works program, Hoover dismissed them: "Gentlemen, you have come 60 days too late. The Depression is over."

A few months later, according to William Manchester's history of the era, The Glory and the Dream, the hapless Hoover said, "Many people have left their jobs for the more profitable one of selling apples."

"Everybody tries to put the best face on things," says Charles Schultze of the Brookings Institution, who was Carter's chief economist. "How much and how far you go varies from time to time."

Herbert Stein, Richard Nixon's chief economist, said Nixon also avoided using "recession" if he could. "We used "post-Vietnam readjustment,' " he said.

Brookings political scientist James Sundquist points out that until Hoover came along, presidents paid no heed to economic crises. Economics was something of concern to the private sector, not the government, in those days.

Sundquist said it is "astonishing to look back at Van Buren's State of the Union message in 1837, or Grant's in 1873, or Cleveland's in 1893 and find that although the country was economically depressed, the subject was not even mentioned."

"Is it news," Ronald Reagan once asked, "that some fella out in South Succotash someplace has just been laid off?"

The reason presidents avoid the subject is obvious, according to Amy Davis, an economic historian at Purdue University: "Once you predict a recession it is not hard for it to become a self-fulfilling prophecy."

And once a president acknowledges a recession's existence, it is expected that he will do something about it.

In an era of $300-billion deficits, the two alternative courses _ cutting taxes or boosting government spending _ can look equally impossible. Bush is being whipsawed between advisers who want him to hold the course and those, like Housing Secretary Jack Kemp, who want action. Kemp's solution is a tax cut.

It took Bush a long time to acknowledge the recession's existence and when he did, last January, he said it would be "mild" and short.

In June he said it had "lasted perhaps longer than we would have thought" but was not "as deep as many have predicted." By September, he said, "These are tough times." The next month he said the economy was "recovering."

In Rome on Nov. 8 he proclaimed the recession over. "I'm not prepared to say we're in recession when you have a growth, a third quarter growth, of 2.4 percent," he said. Last week he repeated: "I don't think we're in recession."

"People have a rather exaggerated notion of what it means when you say recession," Stein said. "It means some terrible thing you should have avoided and some terrible thing you should move heaven and earth to get out of."

Schultze said he may be the only chairman of the Council of Economic Advisers ever to have predicted a recession that did not come. He said the prediction can be found in the Economic Report of the President for 1979.

"You have to search pretty hard to find it," he said.


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