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Recessions, depressions, take your pick

Thursday, March 26, 2009 | 11:01 a.m. CDT

 WASHINGTON — Some views from Washington over the years on the difference between a recession and a depression:

RONALD REAGAN: "A recession is when your neighbor loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his." That was candidate Reagan's characterization of the economy in 1980, when he defeated incumbent Carter for the presidency.

CARTER ECONOMIC ADVISER ALFRED KAHN: "We're in danger of having the worst banana in 45 years." Kahn, a top economic adviser to Carter, irked the White House when he warned in 1978 that rampaging inflation might lead to a recession or "deep depression." Asked by presidential aides to use other words, Kahn promised to substitute the word "banana."

ECONOMIST ALLEN SINAI: "I'm defining 'depression' as much deeper, sharper declines in major measures of U.S. economic activity, including jobs, than typically have happened in the deep recessions of 1981-82, 1973-75 and 1957-58. What's very striking here and what gives me concern is the speed of the declines, half a million jobs a month." Sinai is founder and chief global economist for Decision Economics, a Boston-area forecasting firm.

ECONOMIST PETER MORICI: "My definition of a depression is a slump, or downturn in the economy similar to a recession, that does not self-correct. We've had three of those: two in the 19th century and the Great Depression. A depression doesn't have to be 25 percent unemployment. It can be 12 percent unemployment for 12 years." Morici, former chief economist at the U.S. International Trade Commission, is a business professor at the University of Maryland.

ECONOMIST DAVID WYSS: "You look at what's going on out there, and this is clearly going to be the biggest recession we've had in the postwar era. But does that make it a depression? Or just a recession? To me, if you look at the Great Depression, you're looking at a 25 percent unemployment rate, an extended period, basically four years of decline followed by very little recovery." Wyss is chief economist for Standard and Poor's, a New York-based financial rating service.

ECONOMIST BRUCE BARTLETT: "Well, there's no formal definition of depression. But I think maybe when history is written, we'll look back on this situation with the benefit of hindsight. And I think that (another depression) is a definite possibility. I'm not willing to say so right today, but this is unquestionably the most severe downturn we've had since the Great Depression." Bartlett was a top Treasury official in the Reagan administration and a top Treasury official in the first Bush administration.


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