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January 17, 2001

The Unpredictable Economy: Experts Missed Last 9 Recessions
Steven Pearlstein, Washington Post

Record Shows "Experts" Wouldn't Know a Recession if it Whacked 'Em Over The Head ... Weiss comments

WASHINGTON - In presenting his annual economic outlook last Thursday, the chairman of President Bill Clinton's Council of Economic Advisers was having nothing to do with all the recession talk going around.

"Let me be clear," Martin Baily said. "We don't think that we're going into recession."

The same message was delivered the next day by Mr. Clinton in a Rose Garden economic valedictory. Citing the predictions of 50 private forecasters known as the Blue Chip Consensus - "the experts who make a living doing this," as he put it - Mr. Clinton assured Americans that the economy would continue to grow this year at an annual rate of 2% to 3%.

What the president and his adviser failed to mention was that "the experts" did not predict any of the nine recessions since the end of World War II.

That is true of the members of the Blue Chip Consensus as well as the Council of Economic Advisers, the forecasting staffs of the Federal Reserve Board and the Congressional Budget Office.

And if, as a few renegades have begun to predict, the U.S. economy is heading into a mild recession this year, that would mean one more forecast added to that dismal record.

"We really aren't very good at calling the turning points of the economy in either direction," said Murray Weidenbaum, the top economic adviser in the Reagan administration.

"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." - Laurence J. Peter

The debate between economists about whether or not we are headed for a recession this year will continue until AFTER the recession is over. The statistics that economists use are always a few months old and outdated in this quick-moving economic environment. Just read the news or look around your town and you'll see that the U.S. is definitely in a full-blown slowdown, if not a recession.

Every day, a different company confesses that earnings are lousy and will stay that way for at least the next quarter. Consumer confidence is deteriorating daily as lay-offs, spiking energy prices and a shaky stock market prompt them to keep a close eye on their ever-shrinking wallets.

The anecdotal evidence of recession is hard to ignore - even if the economists don't believe it yet.

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