Recessions don't last forever, but bad policies can prolong the pain.
The Dow Jones Industrial Average fell another 281 points yesterday, or 4%, while President Obama began his political push for nationalizing health care and Barney Frank called upon state, local and federal officials to prosecute "those people whose irresponsible and, in some cases, criminal actions helped bring about this crisis." (In what must have been an oversight, Mr. Frank left himself off the target list.) Citigroup -- subject of three federal "rescues" so far -- closed at $1.02 a share.
Amid so much joy, we thought our readers might like to compare where we are so far in this recession compared to previous downturns. Economist John Cogan of the Hoover Institution has looked at the numbers, and you can see the trends in the nearby chart showing job losses over the months of recession.
So far at least, the current downturn, which officially began in December 2007, isn't much more severe than the average of all recessions since 1970. This month the downturn turns 15 months old, which is one month less than the recession of 1981-82, though job loss hasn't yet been as severe. (Today's jobs report for February could change that.) The recession of 1973-75 lasted 16 months and job loss was also worse. Many Americans may have forgotten those nasty recessions because the last two -- in 1990-91 and 2001 -- were only eight months long and shallow. But even in the worst modern downturns, after 15 months the sources of recovery were forming and the end was in sight.
The larger point is that economies don't spiral down forever without a reason and without policy encouragement. What's worrying about the plunge in equities since January 2, and especially in the last week since Mr. Obama released his radical budget, is that it has come amid the unveiling of the President's policy agenda. Equity prices have reacted to those proposals by signaling that they expect a much deeper and longer recession.
The optimistic message in Mr. Cogan's comparisons is that recessions eventually end. How long they last, and how severe they get, depends in part on the choices our leaders make. The choices that Mr. Obama and Congress are making so far are not contributing to confidence, much less to recovery.
Barack Obama's Economic Policies Could Prolong the Recession - WSJ.com