Tuesday, January 29, 2008

The US economy, Pravda style


In the bad old days of the Cold War, the Soviet press often provided a source of amusement. It would slavishly follow the official pronouncements of top party apparatchiks, never pointing out that one week's pronouncements contradicted the clearly-stated pronouncements of the previous week.

With the demise of the Soviet Union, we have to rely on our own press to provide the amusement. The Washington Post has eagerly embraced this task.

For example, we know from a recent Washington Post editorial that "everyone agrees the economy needs a government boost." However, just eights days earlier, the lead editorial in the Post told readers that "fiscal stimulus may eventually be needed," but warned against jumping the gun. The editorial pointed out that "there is not yet any proof of a recession," adding that there is no "consensus that a recession, if one comes, will be severe."

The Post offered no explanation for this sudden change in positions. There were no surprising data releases in the eight days between editorials. The Post just jumped from a position of watchful waiting to full-speed ahead, as though it had never expressed any reservations about stimulus.

This matters because the Post's position closely reflects the views in top policy circles in Washington. At the time of the first editorial, the inner circle of top economists and policy people were undecided about the state of the economy. They saw clouds on the horizon, but were still not sure that a storm was imminent. By the time of the second editorial, this crew had finally come to grips with the fact that the collapsing housing bubble was virtually certain to sink the economy.

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