07 Apr 2022 Simple Policies to Prevent a Recession
Inflation is the top concern of the American people.
A poll by NBC News found that 67% of those surveyed reported that consumer prices are surpassing their wages. Seventy-one percent believe the nation is headed in the wrong direction, and when it came to casting blame, the largest percentage (38%) said that the Biden Administration is to blame for the state of inflation.
Project 21 member Michael Austin, an economist, concludes that the White House is responsible for a “perfect storm of bad economic ideas” that he fears could turn into a full-blown recession:
For nearly a year, Americans have been watching President Joe Biden handle the economy like someone watching a recently hired Party City employee inflate party balloons.
Naturally, they’ve tried to voice their opinion that the economy is inflated enough, but Biden dismisses these claims and keeps pumping. Pretty soon, that balloon’s gonna burst! Likewise, American investors are now feeling uncomfortable, and they are sounding a proven 60-year-old recession-predictor alarm.
In late March, Bloomberg reported the yield on the 10-year Treasury bond being traded below the yield on the two-year Treasury bond. In other words, investors are shifting their money away from a short-term return (two-year) to a long-term return (10-year). It means that interest rates have investors worried about the U.S. economy in the next few years. Since the early 60s, the U.S. economy has entered a recession every time this happens.
If true again, the U.S. will enter a second recession in just two years.
But we don’t need such a high-level financial indicator to believe the economy is in trouble. Since early 2021, Americans have been sounding the alarm. A University of Michigan consumer survey found consumer sentiment at a nearly 11-year low. The biggest share of Americans since the 1940s is saying their financial health will get worse in the year ahead. Similar falling confidence readings were also seen by the Conference Board.
Moreover, there are countless political polls from both sides of the aisle saying one of Americans’ top concerns is inflation and the economy.
Americans should be acutely aware of the perfect storm of bad economic ideas coming from Washington, D.C. The Federal Reserve printed 10 years’ worth of money – $6.5 trillion – in just 30 months. Over 2020 and 2021, the White House has deficit-spent the equivalent of 30% of the U.S. GDP on stimulus checks and “COVID relief.”
With the announcement of Biden’s latest tax proposals, the administration’s solution to cure the ballooning deficit is the equivalent of curing a hangover by drinking more vodka.
It’s clear the American economy is bloated with cheap, fast money chasing too many products. Families are being priced into poverty. Making matters worse is that American families know it’s not getting better – so they are bracing for that bubble to inevitably pop.
Yet this can all be avoided if the Biden Administration could simply stop inflating the economy, rein in spending, reduce tax rates and pay down the debt.
This might be a simple way to cure America’s financial ills, but it requires the White House to realize it and act in the best interests of America’s most vulnerable working families. That seems like a tall order right now!