JONATHAN CHAIT AUGUST 4, 2010
Ezra Klein has a good take on the differences between the 1982 recession and the 2008 recession:
Financial crises, as Kenneth Rogoff and Carmen Reinhardt have exhaustively documented, are different than normal recessions. And global financial crises are different than domestic financial crises (it's hard to export your way out, for instance. We could spend a long time talking about why that is, but for our purposes, the point is what it does: "The recovery after deep financial crises tends to be slower and more protracted than for a garden variety recession," Rogoff says. And by that measure, how's Obama doing?
"By most measures, the U.S. is just driving down the tracks of a typical post-WW II deep financial crisis," Rogoff e-mailed, "at least according to the benchmarks for unemployment, housing prices, government debt and stock prices given in chapter 14 of my book with Reinhart 'This Time Its Different.' One dimension where the U.S. did somewhat better was the peak to trough decline in output of roughly 4% versus 9% for the average."
In other words, we're mostly following the trend, though we managed to blunt the normal decline in output.
A second factor is that recessions since 1990 have seen an extremely long lag in unemployment -- it really took until about 1996 that the recovery from the 1990 recession started to feel like a real recovery. This is worth keeping in mind when we consider the political implications. The basic model many people have had in their heads for Obama is Reagan, who endured an early recession, saw his approval plummet, then became more popular as the economy recovered:
That model would suggest a shellacking in the midterm elections -- a worse shellacking this time, because Obama's party controls a strong majority in the House while Reagan's was a small minority in the first place and had fewer seats to lose -- followed by a successful reelection as the economy recovers. But it seems very unlikely that the economy will recover any near as quickly this time. Which in turn suggests that 2012 may not look like 1984 at all.