The U.S. economy shrank at an annual rate of 0.9% in the second quarter of 2022, according to the advance estimate released by the Bureau of Economic Analysis (BEA) this morning. This data will undergo further revision, and BEA will release a second and final estimate in the coming months.
The second quarter contraction follows a 1.6% decline in the first quarter. By the commonly accepted definition, two consecutive quarters of negative GDP growth represents a recession. The Biden White House, however, has pushed back on this.
Regardless of what technical definition you prefer, record inflation and higher interest rates have caused consumers and businesses to cut back. Working-class Americans, whose real incomes have been declining over the past year, have been experiencing a recession for months.
Similar to inflation, recessions disproportionately harm lower-income households.
It is revealing to see our political leaders downplay these issues that bring so much harm to the poor and middle class they claim to support. Could this be because the policies championed by the political left have caused the weakened economy we see today?
Those who say “the economy will be fine” may be right, but what about the poor? The overall U.S. economy is resilient. Wealthy consumers are more easily able able to absorb much of inflation, as they can afford higher prices more readily than low-income households.. The poor, by nature, have limited options, and get especially pinched by rising grocery and gas bills. Yet they have been left out of the narrative coming from Washington.
Of course, the Biden Administration is one of the worst offenders. Biden’s economic team would rather litigate the word ‘recession’ than address our real economic problems. In a Wall Street Journal op-ed yesterday, Phillip Magness of the American Institute for Economic Research astutely wrote, “The White House’s attempt to wordsmith its way around a recession shows the dangers of politicizing economic terms. … They hope doing so will insulate the administration from the electoral backlash in the event of a downturn.”
This is politics at its worst. And it is insulting to the American people who are feeling real pain.
The media and political elite are so out of touch with reality that they would have you believe there are benefits to our economic circumstances. The Economist published an article titled, “The silver linings of a recession: Lower inflation and greener energy are worth the price of a short downturn.” Such examples abound.
Indeed, the pandemic has disrupted all economic indicators. We are experiencing high inflation but the labor market, albeit it is smaller, remains strong for now. But there is little point in focusing on the good in the economy when big-government policies threaten to bring all economic indicators into the red. Americans should not have to settle for a recession or high inflation, even if other financial aspects are not yet at their worst.
With record high inflation, economists knew it would be almost impossible to avoid a recession. The federal reserve has raised interest rates by 2.25 percentage points since March.
In North Carolina, however, voters are in touch with reality. According to a Civitas poll, three-fourths of likely North Carolina general election voters knew America was in a recession back in June. Regarding inflation, 88.4% said inflation was a “huge” problem. Another 8.7% said it was a “minor” problem, and only five respondents of the 600 surveyed said inflation was a nonissue.
During a recession, leaders should advocate for tightening their government budgets. But the Biden Administration plans to execute another plan from their failed playbook. Their latest spending bill, obviously re-branded due to the failures of prior versions, would push prices higher. The Biden Administration set the nation up for a recession. The very least they could do would be to acknowledge it.
