The July release of second quarter Gross Domestic Product (GDP) data confirms what the American people have feared for months—the Biden recession has arrived.
According to the report, GDP declined an annualized 0.9% in the second quarter of 2022, following the 1.6% decline in the first quarter. For two quarters in a row, domestic output has shrunk—the traditional definition of a recession. Other than the pandemic, it is the worst six months of economic growth in our economy since the financial crisis recession of 2009.
The Biden Administration’s American Rescue Plan Act opened the spigot of federal spending while simultaneously disincentivizing work, which undercut the ability of the economy to produce the goods and services that would meet the artificially inflated demand. Their failed policies have crushed families and businesses, resulting in a broad-based weakening of economic activity with large declines in residential investment, falling business fixed investment, and anemic growth in private consumption.
Food prices have risen 10.4% over the last year, and energy prices are up 41.6%. Under the Biden Administration, many Americans now must choose between putting food on the table and having enough gas to get to work. Since wages have not kept up with price increases, families have had to cut back on their purchases, resulting in significant declines in goods consumption. These impacts are particularly painful for lower-income Americans and seniors living on fixed incomes.
The aggressive interest rate hikes of the Federal Reserve in response to this four-decade high level of inflation have resulted in average 30-year mortgage rates of over 5.5% compared to under 3% a year ago. As we expected, the housing market has been significantly impacted: the GDP data reflects a staggeringly large housing contraction, with residential investment plummeting by 14%.
Business investment in structures, equipment, and inventories also plunged. Particularly troubling and in contrast to what we normally see, domestic drilling has not risen considerably as the price of oil has increased. Given the Biden Administration’s war on domestic energy production, the sector is not making the kinds of investments that an America First energy policy generated.
Americans need rescuing from the resulting decades-high inflation, recessionary decline, and rising unemployment insurance claims that have brought the U.S. economy to the brink of stagflation. However, instead of taking responsibility for the ongoing slowdown that is entirely the result of failed leadership, the White House is attempting to redefine the commonly accepted definition of a recession.
Last month’s report confirms that under the Biden Administration, our economy is in decline. Tripling down on its failed socialist agenda will not generate broad-based prosperity for the American people. Enactment of the latest version of the Left’s big government socialism bill that imposes higher taxes, onerous regulation, and excessive government spending is not the solution. Instead, these policies have artificially inflated demand, contracted supply, and resulted in inflation rates unseen in the United States in 40 years.
For the benefit of all Americans, we must return to America First policies that generate outcomes of broadly realized economic growth, energy independence, low inflation, declining poverty, and rising real wages.
- Mike Faulkender serves as a Visiting Fellow for the America First Policy Institute (AFPI). Aaron Hedlund serves as AFPI’s Director of Research.