BACKDATING THE RECESSION

BACKDATING THE RECESSION
Washington Post: The panel that has become the recognized arbiter of when recessions start and stop has declared that the U.S. economy has been in recession since March. The administration seized on the pronouncement, saying it made it all the more urgent that Congress pass an acceptable stimulus bill before going home for Christmas. But in fact the declaration weakens the case for the kind of stimulus bill the administration wants.
The average recession since World War II has lasted 11 months. If the National Bureau of Economic Research committee is right, this one has already lasted eight or nine. It could, of course, last many months longer, but it could also be over early next year, long before most of the stimulus contemplated by either the president or either party in Congress could take effect. There is evidence in favor of both possibilities; the administration itself has said the recession will likely be mild and short.
Temporary measures: The right response to such uncertainty is to enact a provisional package of temporary measures that will expand in size only if the need develops. The goal should be to stimulate the economy without compounding the government's long-term fiscal problem. The best way to achieve such balance is to focus on the principal victims of the recession -- replace the lost income of the unemployed.
The president's main proposal is instead to accelerate and lock in place the cuts in income-tax rates that Congress passed but deferred last spring. Those would mainly go to upper-income households more likely to save than to spend the bulk of the money, and most of those cuts would not occur until after next year. That isn't stimulus; it is a reward to a favored constituency, masquerading as stimulus. The same is true of his proposal to repeal the minimum corporate income tax.
The resisting Democrats would mainly use the legislation instead to sweeten unemployment benefits, help the unemployed maintain health insurance and help the states ride out the recession with fewer spending cuts. That's the right thing to do; they should stick to their guns.