<html> <head><style type ="text/css">body { font-family: "Bloomberg Prop Unicode I", Verdana, sans-serif; font-size:125%; letter-spacing: -0.3pt; color: #FF9F0F; background-color: #000000; text-align: left; } p {line-height: 1.25em; max-width:900px; width:expression(document.body.clientWidth > 900? "900px": "auto" );} h1, h2, h3 { text-align: left; font-weight: normal; color: #FFFFFF; } h1 { font-size: 130%; } h2 { font-size: 115%; } h3 { font-size: 100%; } #bb-style { font-size: 90%; max-width:900px; width:expression(document.body.clientWidth > 900? "900px": "auto" ); } b, strong { font-weight: bold; } i, em { color: #FEC54A; } pre { font-family: "Andale Mono", "Monaco", "Lucida Console"; letter-spacing: -0.3pt; line-height: 1.25em; } table { border: 0; font-size: 90%; width: 100%; margin-left: auto; margin-right: auto; } td, tr { text-align: left; } td.numeric { text-align: right; } a:link { color:#53B2F5; text-decoration: none; } a:visited {color:#53B2F5} a:active {color:#53B2F5} a:hover {color:#53B2F5} </style> </head> <body> <p>By Amity Shlaes and Ilan Kolet</p>&#xD; &#xD; <p>This week, we <a href="http://www.bloomberg.com/news/2011-08-22/the-one-thing-congress-can-do-to-help-the-markets-amity-shlaes.html">looked at</a> the so-called Congressional Effect, the phenomenon whereby stocks rise more when Congress is out of session. The data underlying that effect suggest that active government chills markets. Another way to&#xA0;consider the same dynamic is to ask: Was the federal government more active or less active in the most recent recession than in preceding ones?</p>&#xD; &#xD; <p>The answer is more active, going back at least as far as the Great Depression. As the federal government created the National Recovery Administration and a number of other "alphabet" agencies in the 1930s, markets slowed and unemployment stayed high. For the entire decade, neither stocks nor employment returned to 1920s levels. This chart shows a similar effect this time around: the recovery in stock prices has been far weaker than the average for post-war recessions. And unemployment remains stuck at around 9 percent.</p>&#xD; &#xD; <p>This suggests that, in addition to Congressional holiday schedules, the level of government behavior when Congress is in session also affects markets.</p>&#xD; &#xD; <p>(Amity Shlaes, a Bloomberg View columnist and a senior fellow in economic history at the Council on Foreign Relations, oversees the Echoes blog. The opinions expressed are her own. Ilan Kolet, who created this graphic, is a data editor at Bloomberg News.)</p> </body> </html>