Times are bad, but how bad is it?

America, along with the most of the rest of the world, is in a recession. The National Bureau of Economic Research announced today that the American recession began in December 2007, though we have not yet seen two consecutive quarters of economic decline (the traditional definition of a recession).

Most media outlets and politicians are calling today’s financial troubles the worst crisis since the Great Depression. CEO’s representing the Big Three American automakers stated that without a government bailout, America would enter into financial disaster. Barack Obama stated that avoiding a prolonged recession was his number one priority, and would have a stimulus package ready on Day 1 of his presidency. Just a couple of months ago, we were told that without a $700 million bailout, the nation’s banks would collapse.

Everywhere, people are saying that the sky is falling. Mysteriously, though, most Americans seem to be going on with their daily lives and consuming way more than they need. However, to even imply that times are NOT THAT BAD, is political suicide. Two months ago, John McCain was heavily criticized for stating that the economic fundamentals of America were still strong, despite the financial crisis.

Peggy Noonan pointed out in her column in the Wall Street Journal that this “Depression” does not look like a depression as people still seemed to be crowding the shopping malls, restaurants and downtowns of America. Liberal pundits condemned her as insular, elitist and out-of-touch.

Are things really as bad as the media would have you believe? Do we really need Barack Obama to save the day?

Let’s take a look at the numbers during the start of the Great Depression, 1929-1930 (source: Encyclopedia Brittanica):

GNP fell 9.4%
Unemployment increased 5.5%
Industrial production fell 20%

December 2007 (start of the recession according to the NBER report) to Today (most of these numbers are from the NBER report itself):

GDP may not have fallen at all (fell in 4th quarter 2007, rose in 1st 2 quarters of 2008, and fell less than a percentage point in 3Q 2008)
Unemployment increased by about 1-2%
Industrial production fell 5%

Furthermore, in the Great Depression, unemployment peaked at 25%, the stock market dropped 80% off its highs, and the country’s GNP continued to drop 7-10% for years.

Call me elitist, out of touch, etc., etc., but even a cursory glance at the numbers shows that today’s recession is not your grandfather’s Great Depression. In fact, until TODAY, no one could even properly call what we were in a RECESSION. Comparing today’s situation to the Great Depression is like comparing World War II to the Gulf War. Yes, they were both wars, but the difference is an order of magnitude.

We should not refer to the Great Depression to justify government intervention in today’s economy. The comparison simply is not appropriate.