Economic news is always bad.

Gossip, speculation, and scuttlebutt about politics.
July 17 2002 2:46 PM

The Good News Menace

Oh no! Alan Greenspan thinks the economy's rebounding!

Thirteen years ago, Gregg Easterbrook wrote a memorable cover story in the New Republic ("The Sky Is Always Falling") about the inability of economic analysis ever to allow even for the possibility of good news. All economic news, Easterbrook observed, is about the bad things that may happen. When employment rises, the appropriate response is not to be glad that fewer children will go hungry, but to brace oneself for runaway inflation. When the dollar is strong, the public is told not to celebrate its enhanced buying power, but to fret that a spike in the trade deficit will destroy America's manufacturing base. And so on. During the Clinton-era boom, some economic commentators rebelled against pessimistic hegemony by going to the opposite extreme and proclaiming that the Internet and just-in-time inventories had rendered recessions a thing of the past. Now, however, we live once again in a world where all economic news is bad news.

Case in point: Federal Reserve Chairman Alan Greenspan testified yesterday before the Senate banking committee. He observed that "the economy has continued to expand." He said the "mildness and brevity" of the post-Sept.-11 recession "are a testament to the notable improvement in the resilience and flexibility of the U.S. economy." He said,

the fundamentals are in place for a return to sustained healthy growth: Imbalances in inventories and capital goods appear largely to have been worked off; inflation is quite low and is expected to remain so; and productivity growth has been remarkably strong, implying considerable underlying support to household and business spending as well as potential relief from cost and price pressures.

That's good, isn't it? True, "a surge in household spending early in this recovery is unlikely." But that's only because consumer spending didn't decline during the recession, hence failed to create pent-up demand. Overall, Greenspan predicted that U.S. gross domestic product, adjusted for inflation, would increase by at least 3.5 percent and that unemployment would drop to 5.5 percent or less, even though not too long ago 6 percent (about where it is now) was widely regarded as the permanent floor for unemployment in the United States.

After Greenspan delivered this favorable assessment, stock prices fell. To be sure, Greenspan had dedicated some of his testimony to a headline-generating denunciation of the "infectious greed" evident in recent corporate accounting scandals. But according to the New York Times' Floyd Norris,

it may not have been his views on the speculative excesses of old that affected share prices. Instead his upbeat assessment of the current economy paradoxically may have hurt prices. There was no hint that the current stock market decline would lead the Fed to ease credit again next month, as some had hoped. Instead, Mr. Greenspan seemed to indicate that the next move in rates would be up, although he did not appear to be warning that such a move was imminent.

Let's see if Chatterbox has this right. When Greenspan says the economy is doing poorly, that's bad news. And when Greenspan says the economy is doing well … that's bad news, too.

Timothy Noah is a former Slate staffer. His  book about income inequality is The Great Divergence.


The World

The Budget Disaster that Sabotaged the WHO’s Response to Ebola

How Movies Like Contagion and Outbreak Distort Our Response to Real Epidemics

PowerPoint Is the Worst, and Now It’s the Latest Way to Hack Into Your Computer

Everything You Should Know About Today’s Eclipse

An Unscientific Ranking of Really, Really Old German Beers


Welcome to 13th Grade!

Some high schools are offering a fifth year. That’s a great idea.


The Actual World

“Mount Thoreau” and the naming of things in the wilderness.

Want Kids to Delay Sex? Let Planned Parenthood Teach Them Sex Ed.

Can Democratic Sen. Mary Landrieu Pull Off One More Louisiana Miracle?

  News & Politics
Oct. 22 2014 9:42 PM Landslide Landrieu Can the Louisiana Democrat use the powers of incumbency to save herself one more time?
Oct. 23 2014 11:51 AM It Seems No One Is Rich or Happy: I Looked
The Eye
Oct. 23 2014 12:48 PM Track Your Bag and Charge Your Phone With This Carry-On Smart Suitcase
  Double X
The XX Factor
Oct. 23 2014 11:33 AM Watch Little Princesses Curse for the Feminist Cause
  Slate Plus
Oct. 23 2014 11:28 AM Slate’s Working Podcast: Episode 2 Transcript Read what David Plotz asked Dr. Meri Kolbrener about her workday.
Brow Beat
Oct. 23 2014 12:01 PM Who Is Constantine, and Should You Watch His New Show?
Oct. 23 2014 11:45 AM The United States of Reddit  How social media is redrawing our borders. 
  Health & Science
Bad Astronomy
Oct. 23 2014 7:30 AM Our Solar System and Galaxy … Seen by an Astronaut
Sports Nut
Oct. 20 2014 5:09 PM Keepaway, on Three. Ready—Break! On his record-breaking touchdown pass, Peyton Manning couldn’t even leave the celebration to chance.