White House’s Definition of Recession Comes Under Expert Criticism

Grover Norquist, President of Americans for Tax Reform speaks about President Trump's new tax reform plan during a news conference on Capitol Hill, April 12, 2018 in Washington, DC. Mark Wilson/Getty Images

The Biden administration has come under criticism for rejecting the definition of recession as two consecutive quarters of GDP declines, just ahead of the upcoming second-quarter GDP data, as economists differ on their takes regarding the economic situation.

“What is a recession? While some maintain that two consecutive quarters of falling real GDP [gross domestic product] constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle,” a July 21 White House statement said.

In an interview with Fox News, Grover Norquist, the president of Americans for Tax Reform, called the White House statement “ridiculous.”

“They have to say ridiculous things like that, even have an argument with a dictionary … Sitting around the table with [President Joe] Biden are all the interest groups in the modern Democratic Party,” Norquist said, pointing to labor unions and environmental activists. He also blamed progressive ideologues for having policy agendas that are “disassociated from reality.”

The National Bureau of Economic Research, the “official recession scorekeeper,” defines recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months,” the White House noted.

The Biden administration argues that recession is to be defined based on a “holistic look” at the data, including such factors as incomes, business spending, consumer spending, and the labor market. Based on these data, “it is unlikely” that a second-quarter economic contraction following the first-quarter decline indicates a recession.

U.S. GDP already contracted in the first quarter, with the Federal Reserve Bank of Atlanta expecting second-quarter GDP to contract once more. The second-quarter GDP data are due on July 28.

The Epoch Times has reached out to the White House.

Norquist also raised concerns about the plan by 15 states to hand out inflation relief checks to citizens as a way to combat the financial pressure of rising prices.

Pointing to 10 states run by Republican governors that are aiming to phase their income taxes to zero, he said that sending a check is “just spending” and “not a tax cut.”

US Recession

A Reuters poll of economists, conducted between July 14 and 20, found that median predictions point to a 40 percent probability of a recession in the United States in the coming year, with a 50 percent chance of it happening in two years.

This is a big jump from the 25 percent and 40 percent reported in June. More than 90 percent said that any recession would be mild or very mild. Four respondents expect the recession to be severe.

In a July 22 tweet, Chris Williamson, chief business economist at S&P Global Market Intelligence, warned that the American economy is contracting at a rate “not seen since the global financial crisis in 2009.”

It is not just the United States at risk of recession but the entire global economy. In an interview with Reuters, IMF Managing Director Kristalina Georgieva said that the agency will soon downgrade its 2022 global economic growth forecast for the third time this year.

“The outlook since our last update in April has darkened significantly,” she said. “We are in very choppy waters … The risk [of recession] has gone up. So, we cannot rule it out … It’s going to be a tough ‘22, but maybe even a tougher 2023.”