The recession that began in March 2001 was relatively mild by historical standards when measured by total output. The recession saw just three quarters of negative growth and a cumulative output decline of less than 1 percent of gross domestic product (GDP). By the end of 2001, GDP had fully recovered to pre-recession levels.

The recession that began in March 2001 was relatively mild by historical standards when measured by total output. The recession saw just three quarters of negative growth and a cumulative output decline of less than 1 percent of gross domestic product (GDP). By the end of 2001, GDP had fully recovered to pre-recession levels.

Economic performance since the end of the recession in November 2001, however, has been weak – averaging just over 2.5 percent, which was below the average growth rates in the previous two recoveries.

When looking at employment measures, recent economic performance has been much worse. The unemployment rate has increased from 4.2 percent at the beginning of the recession to the current rate of 6.2 percent. In addition, the number of jobs has fallen by around 2.6 million.

Despite the relatively small drop in total output, federal government revenue has dropped to 16.4 percent of gross domestic product (GDP) – the lowest level since 1959. Furthermore, deficits have reached a record $455 billion after being in surplus at the start of the recession. See Figure 1 below.

A natural question to ask is whether the current economic and budget situation is somehow “normal” in the recovery period just after a recession. A new OMB Watch report attempts to provide an answer by comparing the economic and budget performance of the current recovery with that of the two previous recoveries. Each recession and recovery cycle contains unique characteristics; however, this comparison should shed some light on how the economy is currently performing, and on how successful economic policy has been in recent years.

Unfortunately, we find that policies that were sold as economic and job stimulus did not do their job. Instead we are faced with job losses, massive deficits, and very little stimulus “bang for the buck.”

Click here for the full report

Firure 1. Budget Surplus/Deficit (Change from cycle peak, % of GDP)