Justin Haskins
On Thursday, the U.S. Commerce Department released important data showing the U.S. economy severely underperformed in the second quarter of 2021.
According to the quarterly figures, U.S. gross domestic product improved by just 6.5%, which includes the months of April, May, and June. Many analysts expected GDP growth to hit 8.5%, which would have been 26% higher than the reported data from the Commerce Department.https://products.gobankingrates.com/r/d9360ea31bf06ea8b9d0ef49288e28fb?subid=
That’s not the only economic problem facing the country. In July, U.S. businesses reported more than nine million jobs open in May that were not filled, the highest number ever recorded. (The data goes back to 2000.) Inflation has continued to persist throughout 2021, and there are no signs of a return to normal.
In June, the Labor Department noted that the consumer price index had increased by 5.4% compared to one year prior, the largest 12-month increase since August 2008 — which was just before one of the worst stock market crashes in U.S. history.
Many economists have rightly argued the main reason there are so many open jobs available today is that there are now too many COVID-related relief programs. These provide such substantial unemployment benefits to nondisabled workers they actually discourage the seeking of employment.
Further, economists across the political spectrum — including Larry Summers, who served as director of the National Economic Council under President Barack Obama — have said that government and central bank programs are causing inflation and that additional spending could lead to an even greater, potentially catastrophic inflation spike.
Rather than pursue policies to reduce inflation and encourage people to go back to work, the Biden administration and its Democratic Party allies in Congress have done everything in their power to exacerbate these problems. They’ve done so by expanding and/or extending a slew of welfare, unemployment, and stimulus programs.
Federal student loan repayments remain frozen (this could continue well into 2022), and tens of millions of families are now being given up to $300 per child per month under the American Rescue Plan’s expanded child tax credit provision — including families who earn as much as $150,000 per year.
Those programs are just the tip of the iceberg. Congress is getting closer to passing a $1 trillion infrastructure package. Democrats are pushing a $3.5 trillion climate, education, and welfare bill. The $3.5 trillion plan would, among many other things, create huge new “green” energy tax credits, subsidies for childcare, and a universal prekindergarten program, as well as expand Medicare benefits to cover dental and other health care services.
The risks are real.
The more Democrats spend, the more likely the Federal Reserve will be forced into the difficult decision of either increasing interest rates, further slowing economic growth by making lending more expensive, or allowing inflation to continue, driving up prices for consumers and lower-income families.
Only a return to fiscal sanity, mixed with pro-growth economic policies that encourage people to return to the workforce, the very opposite of Democrats’ present policy platform, can avert disaster.