the national interest

National Review Economics Writer Unfamiliar With Economics

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I actually compare our economic performance to how, historically, countries that have wrenching financial crises perform,” President Obama told Andrew Ross Sorkin in a recent interview. “By that measure, we probably managed this better than any large economy on Earth in modern history.” The basis for Obama’s claim is a 2008 paper by Carmen Reinhart and Kenneth Rogoff, which found that economies that endure financial crises tend to suffer more prolonged damage than those emerging from a normal recession. Indeed, measured against other economies that have gone through financial crises — that is, other historical examples, or contemporary examples of other countries that faced the same 2007-2008 financial crisis — the U.S. economy has performed quite well. National Review’s Kevin Williamson mocks Obama’s argument:

President Obama insists — straight-facedly — that in the context of a wrenching fiscal crisis, the United States under his leadership performed better than any major economy in modern history. That isn’t even close to being true, of course. Obama’s presidency will coincide with a remarkably weak recovery, with GDP essentially treading water. His presidency will be the first in modern times to fail to coincide with at least one year of 3 percent economic growth.

Here’s what is telling about Williamson’s argument (I’ve omitted nothing of relevance): Williamson does not acknowledge the source of Obama’s claim. To be sure, the Reinhart-Rogoff finding is not gospel, but Williamson does not provide any argument against it or even provide any indication he has heard of it.

Nor does Williamson provide any evidence to contradict Obama’s conclusion. Refuting the claim that the U.S. has outperformed other economies that have emerged from a financial crisis would mean naming one or more economies that have undergone a financial crisis and then enjoyed faster growth than the U.S. has since 2008. Williamson does not do so. Instead, he compares Obama’s recovery to previous recoveries from nonfinancial recessions. (And the metric he picks — whether or not the economic exceeded 3 percent growth in a single year — is ludicrously cherry-picked, as if a recovery is measured by the growth rate in its best single year, to count George W. Bush’s historically anemic economy as a success.) This follows Williamson’s assertion that Obama’s claim is false “of course” — apparently it is so obvious he needn’t bother providing even a single piece of relevant evidence against it.

Update: I didn’t even notice this on my first pass, but Williamson uses the term “fiscal crisis” when he means “financial crisis.” A fiscal crisis is related to a country’s government budget. A financial crisis is related to a country’s financial system. These are completely different things. Keep in mind, Williamson used to write a blog dedicated to the topic of public debt! And he doesn’t know the difference.

NR Economics Writer Unfamiliar With Economics