Mitch Daniels, Bush's OMB Director, Is Deluded About the Severity of the 2001 Recession

Morning Edition featured an interview with Mitch Daniels in which he was asked about whether he thought the Bush tax cuts were a good idea. Mr. Daniels, who was director of the Office of Management and Budget at the time, responded by saying that the tax cuts were widely credited (referring to the 2001 recession), "with the shallowness and the swiftness of recovery from that recession."

In fact, the recession was not short and mild. It led to what was at the time the longest period without job growth since the Great Depression. NPR should have pointed out Mr. Daniels' mistake.

[This is corrected from an earlier version, that confused Daniels' wording to wrongly imply that he said most people did not notice the recession. He had actually said that they did not see the recession coming.]

A Vote for Daniels is a Vote for a Keynesian President
written by izzatzo, February 28, 2011 6:32 AM

Back in the days before socialism took over under Obama when teabaggers were making a living in a free market, their real output of unlicensed joe-the-plumber installations doubled under the Boy Monarch Bush tax cuts.

As Mitch Daniels and any economist knows, this was a Pareto Improvement since everyone was made better off and no one was made worse off. Without the Bush tax cuts that paid for themselves, the USA would have entered the Great Recession four years earlier than it did.

Vote for Mitch Daniels, Keynesian Tax Stimulator. As President, Daniels will reduce taxes to zero in order to pay off the debt entirely and maintain full employment.

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written by joe, February 28, 2011 6:46 AM

Q2 2001 - Economy expanded at annualized rate of 2.6
June 2001 - pass bush tax cuts
Q3 2001 - Economy contracted at annualized rate of 1.1%
Q4 2001 - Economy expanded at annualized rate of 1.4% although gross private investment contracted at an annualized rate of -21.1%.

Q1 2002 - Economy expanded at annualized rate of 3.5% with residential real estate growing at an annualized rate of 11.1%.

Conclusion: The Bush tax cuts slowed the economy but the housing bubble turned things around in 2002.

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written by skeptonomist, February 28, 2011 10:50 AM

And incredibly Dean forgets to mention that a large part of the recovery of employment was due to the housing bubble.

How noticeable the recession was depends on whether you are a worker or a capitalist. Profits were scarcely affected:

www.skeptometrics.org/Employees-Profits.png

They dipped briefly in 2008-2009 but reached a record $1.4T last quarter.

bubblicioius
written by pete, February 28, 2011 10:51 AM

Clinton/Greenspan dot com bubble, crash, then Bush/Greenspan/Bernanke bubble, crash, then...
Note Joe says the housing bubble seemed to start in 2002, when Krugman was asking for it, while Shiller and Dean Baker (who did well on NPR this morning) said we were already in one.

-2

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written by jamzo, February 28, 2011 12:12 PM

gee whiz! david brooks gives a shout out for mitch daniels one day and suddenly mitch appears in a series of high profile interviews

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written by fuller schmidt, February 28, 2011 12:49 PM

No doubt you are extremely, incontrovertibly accurate about Krugman, pete.

was that sarcasm, fuller?
written by pete, February 28, 2011 1:58 PM

PK Aug 02, 2002, NYT:
"To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

funny thing is...
written by pete, February 28, 2011 2:00 PM

Krugman now tries to claim credit for recognizing the bubble 3 years later, in 2005, when the hedge funds were trying to find ways to short real estate.

Chief Fool In Charge of The Dirty Work
written by dilbert dogbert, February 28, 2011 3:07 PM

I do remember thinking and telling friends how sorry I was, NOT, that gwb was going to win but be a one term president as he was being elected into the coming recession. Good prediction about winning but not so good about 911.

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written by Robert, February 28, 2011 4:15 PM

At one point in the inteview, Mitch said something to the effect that Bush had never sold the tax cuts as something that would boost the broader economy. Huh? That's exactly how he sold them, and that's exactly not what they ended up doing:

http://www.tax.com/taxcom/taxblog.nsf/Permalink/CHAS-89LPZ9?OpenDocument

Thank's to Doug Henwood for the link.

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written by DoctoRx, February 28, 2011 5:17 PM

Deluded is an unduly strong word to use. Most people accept that the recession in 2001 was indeed short and mild, as recessions go. It was the expansion from 2002 onward that was weak.

-1

yep, it was (not very well done) sarcasm, pete
written by fuller schmidt, March 01, 2011 2:07 PM

It took seconds to google the reality of Krugman's quote and his (and others') response. I took your first post as a "making your chops versus a Nobel winner", and I still think that.

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written by Tony, March 02, 2011 8:17 PM

I'm sorry Dean, but my vote is that the 2001 recession was a mild one. It only lasted 8 months, and after all the endless revisions to our GDP, the final, final (did I say final) revisions to our GDP for 2001, was minus 1.3% in the first quarter, and minus 1.1% in the third quarter. And since housing starts were being reported monthly beginning in 1959, this mild recession did not effect the housing market. Many economist missed this recession, because they believed that you cannot have a recession without housing being a part of it. Every recession since 1960, had at least a 30% decline in housing starts from its peak, except 2001. Now I admit, it was a very slow recovery, but is was a very mild recession.

Mitch Daniels, Bush's OMB Director, Is Deluded About the Severity of the 2001 Recession

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