The Unspeakable R Word

Testifying before Congress, Federal Reserve Chairman Ben Bernanke conducted a master class in the art of understatement last week. "The economic situation has become distinctly less favorable since the time of our July report," he said. Consumers, who account for 70 percent of U.S. economic activity, have been hamstrung by the "continuing contraction of the U.S. housing market," rising energy costs, and slowing job creation. And thanks to "tighter credit conditions for some firms," business spending should be "subdued" for the next several months.

Distinctly less favorable? Subdued? It calls to mind Japanese Emperor Hirohito's comment on Aug. 14, 1945, that "the war situation has developed not necessarily to Japan's advantage."

In recent weeks, abundant evidence has pointed to a recession — a broad-based contraction of economic activity — from rising unemployment claims to the continued pain in housing. Wall Street economists, whose employers have been experiencing their own private recession since last summer, haven't shrunk from using the R word. But in certain quarters of Washington, euphemism and understatement, verging on outright denial, are par for the course. In an episode of the hit 1970s show Happy Days, Fonzie, laboring to concede error, repeatedly choked on the word wrong, unable to get past the "rrr" sound. (Trust me, it was funny.) In last year's hit comedy Knocked Up, a character, queasy about using the technical term for terminating a pregnancy, refers to a procedure that "rhymes with shmashmortion." Bernanke and the man who appointed him, President Bush, are clearly coping with similar verbal tics. Call it a slowdown, cite challenges, or insist the fundamentals are sound. But please don't call it a recession. Speaking at a press conference on Thursday, Bush said, "I don't think we're headed to recession, but no question we're in a slowdown."

Recessions are unspeakable for several reasons. Many have come to believe (erroneously) that central bankers and executives, by deploying information technology and superior management, have engineered the business cycle out of existence. In addition, the impact of a contraction is so ghastly as to spur denial. For any debt-laden entity—a consumer, a company, a government—a decline in revenues can have a very swift and painful impact. (Think about how soon you'd be begging for debt forbearance if your salary fell 10 percent tomorrow.) For a president, it is political poison to admit that an economic event that rhymes with shmashmession could be within the realm of possibility. Since recessions sap tax revenues, they tend to make huge deficits—like the $407 billion whopper projected for this fiscal year—even larger. And so, while the Blue Chip Economic Forecast in February cut its estimate for 2008 growth to 1.7 percent, the Office of Management and Budget is
sticking to its optimistic forecast of 2.7 percent—nearly 50 percent higher.
www.slate.com/id/2185372?nav=wp

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Last updated 06/03/2008

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