The Bush administration hasn't uttered the dreaded "R" word yet concerning the economy, but it is getting awfully close.
President Bush on Thursday talked about "tough times" and Michael Boskin, his chief economic adviser, spoke of the possibility that the economy could contract in either the final three months of this year or early 1991.Bush and Boskin both avoided using the term recession, but Boskin opened the door to that possibility by discussing the chances that the gross national product, the country's total output of goods and services, might decline in one or more quarters.
The traditional definition of a recession is two consecutive quarters of declining GNP.
The comments were much gloomier than administration forecasts before Tuesday's elections. Administration officials had been talking in hopeful terms that the oil shock from Iraq's invasion of Kuwait might not be severe enough to push the economy over the brink.
"We're in some tough times right now," Bush told reporters. He said he would consult economists in and out of government to discuss ways of cushioning the impact on American families.
In a speech to the American Council for Capital Formation, Boskin said, "The economy at best is in a lull, but we do expect that lull to be relatively brief and relatively minor."
He said the administration expects the negative impacts on economic output to begin showing up in the current October-December quarter.
While the GNP grew at a modest annual rate of 1.8 percent in the July-September quarter, Boskin said that rate could turn negative in the current quarter. He also said it was possible the economic contraction could last into early 1991.
"The short-term forecast, if anything, is even more uncertain than normal because we just can't say for sure what the size and duration of the oil shock will be," the presidential economic adviser said.
The country last suffered through a recession from 1981-82, a slump brought on by the Federal Reserve as the central bank pushed interest rates to levels not seen since the Civil War in an effort to battle double-digit inflation.
The cure worked and in November 1982 the nation embarked on a record peacetime expansion.
Boskin said the current oil shock, unlike those of 1973-74 and 1979, was occurring during a period of relative price stability. For that reason, he said, he expected any adverse impact to be short in duration.
He said his "best guess" was that the nation would return to healthier growth rates by the middle of next year.