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Those looking for a pronouncement from on high that recession has finally gripped the U.S. economy got the best they could hope for Friday.
"My personal opinion is that the economy is now in a recession," said
Feldstein was speaking only for himself, but his comments are as official--and as unpoliticized--as anyone's likely to get about the state of the economy. NBER, an esteemed non-profit group, is considered by many to be the final word on business cycles in the U.S.
Feldstein predicts the recession will "last longer and be deeper" than the last two recessions earlier this decade. And it could possibly be worse than the 16-month recession of the early 1980s.
The question is a bit academic. Recession or not, the U.S. is now engulfed in somewhat of a "perfect storm" of economic problems: A rapidly falling dollar, inflation, gummed-up credit markets and rising home foreclosures. The latest indicators: Friday, the Fed and
Most economists consider an economy in recession when it has two successive quarters of economic contraction. That's still not the situation in the U.S.--even during the last quarter, GDP growth was positive, albeit less than 1%.
The NBER usually won't even identify a recession until it is over. The group measures peaks and troughs in the business cycle; once it becomes obvious the economy's growth is no longer trending downward, the group will then label the downturn as a recession.
"The evolution of the economy" he said, "will depend on the policies adopted by the government." And there's no shortage of opinions there.
In remarks to the Economic Club of New York Friday morning, President Bush dismissed several Congressional proposals to deal with the economic malaise, including one bill he says would provide $4 billion in state and local funds to buy empty homes that have been abandoned or foreclosed upon.
He touted the administration's initiative to expand the number of loans backed by the Federal Housing Administration, and he praised a private-sector plan to temporarily freeze loans that are headed for foreclosure.
"Our economy is obviously going through a tough time," he told the audience, adding, "I believe that we're a resilient economy."
And speaking at a meeting of the National Community Reinvestment Coalition, Federal Reserve Chairman Ben Bernanke highlighted the central bank's efforts to halt foreclosures. It's most significant step: Several proposals in December that ban "unfair or deceptive" practices, such as lending to borrowers who cannot repay a loan and doing away with prepayment penalties that harm borrowers.
Next week, the Fed is expected to cut interest rates by as much as half a percentage point, essentially ignoring inflation concerns.
Thursday, Treasury Secretary Henry Paulson unveiled recommendations to tighten regulation among lenders and mortgage brokers. On Capitol Hill, Rep. Barney Frank, D-Mass., and Sen. Chris Dodd, D-Conn., announced their own plans to diminish foreclosures.