The U.S. president and members of his administration are avoiding the “R word” – recession – despite the assertion by opposition party politicians and some economists that the country’s economy now meets that definition.
Speaking in the White House State Dining Room on Thursday, President Joe Biden said Federal Reserve Chairman Jerome Powell, as well as “many of the significant banking personnel and economists, say we’re not in recession.”
He then outlined the job growth and high-tech investment during his administration, concluding “that doesn’t sound like a recession to me.”
Biden’s remarks came after the Commerce Department released data on Thursday showing the U.S. economy has contracted for a second straight quarter, a traditional benchmark for a recession.
The president and his administration’s chief financial officer, Treasury Secretary Janet Yellen, are to make remarks later in the afternoon about the nation’s economy.
The gross domestic product of the United States – the broad measure of goods and services produced in the country – shrank at a seasonally adjusted annual rate of 0.9 percent in the April through June period, according to the Commerce Department’s Bureau of Economic Analysis. That follows a 1.6% decline in this year’s first quarter.
“Popularly we are in a recession, because most people think that a recession involves two consecutive quarters of negative economic growth, and we’ve got that,” Desmond Lachman, an economist at the American Enterprise Institute, told VOA.
Consumer sentiment “now is close to record low levels, they’re struggling with high inflation, the wages are getting eroded, they’ve lost a lot of money on the stock exchange. So, consumers don’t feel good about the economy,” added Lachman.
Recessions in the United States are officially declared by the National Bureau of Economic Research, but such determinations are made in retrospect. Its definition of a recession is based on a significant decline in economic activity over numerous months, taking into consideration such factors as employment, output, retail sales, and household income.
“They [the BEA] only make that judgment, something like six months or a year after the numbers look like they’re indicating the recession. So, in short, it’s too early to say that we’re officially in a recession,” said Lachman.
In the meantime, economists outside the government and elected officials are free to spin the numbers to make their own declarations.
“The Biden White House can play word games and try and contort the English language as it sees fit in order to advance its radical and harmful agenda. What this administration cannot change is the fact that American consumer confidence continues to fall under Biden’s watch,” said Steve Moore, an economist with FreedomWorks, a conservative advocacy group. “Americans are overwhelmingly pessimistic about the state of the Biden economy, and no wordplay over the definition of ‘recession’ can change that.”
Numerous Republican members of Congress quickly took to Twitter immediately after the data was released to declare the country is now in a recession.
“Democrats threw us into recession,” said Senator Ted Cruz, a member of the Senate’s joint economic committee.
“Biden and his army of woke journalists can obscure this all they want, but they cannot escape this fact: America is in a recession,” declared Carlos Gimenez, a congressman from Florida and member of the House transportation and infrastructure committee. “Hardworking American families deserve so much better than what this administration has put us through in the last year.”
“The U.S. is officially in a recession, thanks to the Democrats’ reckless spending. Americans are suffering because of Joe Biden’s America-last policies,” said Jeff Duncan, a congressman from South Carolina and a member of the House Energy and Commerce committee.
Inflation in the country hit a 40-year high of 9.1 percent last month. The country’s central bank, the Federal Reserve, hiked interest rates on Wednesday by three-quarters of a percent, its latest such increase to try to tame price hikes, but a move some economists warn could trigger a recession.
“The problem with the Federal Reserve is they do too little, too late,” according to Lachman. “By the time that they started raising interest rates at the beginning of this year, the inflation genie was well out of the bottle – we had multi-decade highs in the inflation rate. The same thing is now occurring this time around that the Fed keeps raising interest rates, even though there are rather clear signs that the economy is slowing.”
Lachman, a former official of the International Monetary Fund, noted that the actions by the Federal Reserve have put a lot of developing economies under pressure as capital that had flowed to those countries has returned to the United States, and a stronger dollar is making it difficult for those countries to fund their balance of payment deficits.
“Once the United States economy slows, it means that the export markets for the emerging market countries isn’t as robust as it was before. So, we could see difficulty for the emerging market, certainly the remainder of this year, but there might be relief next year, once the Fed stops this interest rate hiking cycle and begins cutting interest rates,” predicted Lachman.
“Our goal is to bring inflation down and have a so-called soft landing, by which I mean a landing that doesn’t require a significant increase in unemployment,” Powell told reporters on Wednesday. “We understand that’s going to be quite challenging. It’s gotten more challenging in recent months.”