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Angie Drobnic Holan
By Angie Drobnic Holan November 5, 2010

Tim Kaine said economy shrank for the first time in '09

Editor's note: After we first published this item on Oct. 25, 2010, readers pointed out that our original item considered only current dollar, or nominal, GDP instead of real GDP. We spoke with some experts who agreed that we should have used real GDP. So we have corrected the story and changed the ruling on this item from Mostly True to Barely True.

Democratic National Committee Chairman Tim Kaine appeared on This Week with Christiane Amanpour to defend his party amidst expectations that Republicans will likely make significant gains in the elections set for Nov. 2, 2010.

Amanpour asked Kaine about the terrible economy and about remarks President Barack Obama made that it was important for Democrats to have a sense of humility about what they could accomplish without Republican cooperation.

"What does he mean by humility?" Amanpour asked.

"I think it's trying to find the balance between telling a story of accomplishment and change and improvement, while acknowledging that we still have a long way to go," Kaine said. "So when the president came in, as you know, Christiane, the economy of the United States was actually shrinking for the first time in about 70 years. We had come through a decade where we lost jobs, income declined, poverty gaps widened. Now the economy is growing again. ... We've got to keep climbing and not go backward, but you have to have that humility because a lot of people are still suffering, and we've got more work to do."

We were interested in fact-checking Kaine's comments that when Obama took office, "the economy of the United States was actually shrinking for the first time in about 70 years." Had the downturn been that historic?

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We know from some of our previous fact-checks that experts like to measure the economy by gross domestic product, or GDP, the total market value of goods and services produced within a country's borders over a specific period. The inflation-adjusted GDP growth rate is widely considered a primary indicator of the status of the economy.

In the United States, the U.S. Department of Commerce's Bureau of Economic Analysis compiles GDP estimates on both a quarterly and annual basis. The White House and Congress use the bureau's projections to prepare budget estimates, and the Federal Reserve uses it to set monetary policy, according to the bureau. It describes its GDP estimates as "one of the most closely watched of all economic statistics."

We looked into statistics on changes in GDP. If it goes up, that means the economy is growing. If it goes down, that means the economy is contracting. We used the GDP as calculated in constant dollars, to rule out the effects of inflation.

Obama took office at the beginning of 2009. In 2008, the economy showed 0 percent change, and in 2009, it showed a decline of 2.6 percent using inflation-adjusted figures. We started looking back through the years, and we soon found small declines sooner than Kaine said when we adjusted for inflation. In 1991, the economy declined 0.2 percent. In 1982, it declined 1.9 percent and in 1980, 0.3 percent. In 1975 and 1974, there were small declines of 0.2 and 0.6. In 1958, there was a decline of 0.9 percent. There were several years of declines in the 1940s, with the steepest of 10.9 percent in 1946.

Kaine does better when you consider GDP in nominal dollars -- that is, not adjusted for inflation. According to this metric, in 2008 the economy dropped 1.7 percent compared with the year before. There are no declines until 1949, of 0.7 percent. There was also a small decline in 1946, down 0.4. In 1938, there was a significant decline of 6.3, and then more declines in 1933, 1932, 1931 and 1930. No statistics are available before 1930.

So Kaine is pretty close if you don't adjust for inflation. But when you do, there are several more recent years when there were declines. So we find his statement Barely True.

Editor's note: This statement was rated Barely True when it was published. On July 27, 2011, we changed the name for the rating to Mostly False.

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Tim Kaine said economy shrank for the first time in '09

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