Massive Government Spending Will Exacerbate 2023 Economic Downturn: Analyst
News Analysis
There are a lot of banks Forecast economic pain in 2023, one economic historian warns that the U.S. government’s gargantuan spending programs will push the economy well past its breaking point.
Experts are arguing about whether the United States It is likely that the country will experience a recession. Even optimistic forecasts predict that even if a recession is not imminent, there will be a severe downturn marked by slower growth and higher unemployment.
Morgan Stanley’s 2023 Global Macro Outlook It is straightforward, and predicts that the U.S. Economy will be strong. “will tread water with 0.5% growth.” The report also suggests that even though inflation slows towards the end of the year the outlook for jobs is grim.
“Net job gains have slowed markedly over the year and, together with a modest rise in labor force participation, will likely result in a slightly higher (but relatively healthy) unemployment rate of 4.3% in late 2023,” The outlook is positive.
Top Concern
The U.S. voter is particularly worried about the economic outlook and sensitive to negative news at this time.
Of all the issues of concern to the public in the new year, the state of the economy—as measured by inflation, housing prices, jobs, and other indices—easily outweigh other issues in the minds of voters. According to a poll (PDF) conducted in December by the Associated Press NORC Center for Public Affairs Research, this concern cuts straight across party lines. Although Republicans and Democrats are in sharp disagreement over border security, climate change and private guns, they share a common belief that the government should be more effective at addressing the economic issues that determine the quality and life for large numbers of people.
“Among all policy areas, domestic issues continue to be cited most frequently as the public’s most pressing policy concerns … Looking at specific domestic policies, economic issues are the public’s top priority. The biggest concern is the economy in general, with 31% mentioning it as a top priority, slightly more than in June,” the NORC Center’s report states.
A crowd shops at a Montebello, Calif. supermarket on Aug. 23, 2022. (Frederic J. Brown/AFP/Getty Images)Tellingly, the second most-cited concern, in the poll’s findings, namely inflation, is a subsidiary issue of the most-cited, economic concern. 27% of respondents identified immigration as their most pressing concern, and 16% cited violence and crime.
The report’s authors summarize their findings succinctly: “Economic issues dominate the public’s agenda for 2023.”
These survey results were used to determine the S&P 500. Closed nearly 20 percent lower at the end of 2022 than in the year prior, marking the stock market’s worst overall performance since 2008, and record gas prices caused mass panic.
Massive government spending on various policies, programs, and other policy areas is contributing to the slow economic growth.
That’s the view of Brian Domitrovic, a professor of economic history at Sam Houston State University in Texas. Domitrovic believes the country’s current period of slow economic development is reminiscent the 1970s, a decade commonly associated with stagnation.
“We had slow growth for a dozen years after 1969, and we also had very short price appreciation in the 1970s, and there was kind of a widespread understanding that nobody had any real solutions that were very good or plausible,” Domitrovic said so to The Epoch Times.
Power of the purse
There are obvious parallels. However, the very high rate of government spending makes the prospects for the next year more bleak, he stated. Although this is not a new phenomenon, and spending was quite high even under the Republican presidency of George W. Bush back in 2001, the Biden administration’s fiscal profligacy is a game-changer and is not offset by the economic growth that acted as a partial brake on such huge spending in the past, Domitrovic argued.
“When you look at the spending in the 1980s, it went up to 24 percent of GDP from the previous high of 19 percent. That was in the context of racing GDP growth beginning in 1983. We have slow growth now,” He said.
The National Defense Authorization Act (NDAA). a href=”https://www.theepochtimes.com/www.armed-services.senate.gov/imo/media/doc/fy23_ndaa_agreement_summary.pdf”>allocates $857.9 billion for various departments and programs in fiscal year 2023, including numerous imperatives not strictly related to the defense of America’s borders, such as $800 million for the Ukraine Security Assistance Initiative, $165.3 million for “the continued training and equipping of vetted Syrian groups and individuals,” Independent assessment of the U.S.’s role in training, advising and equipping Somalian forces, and establishment of a “Civilian Protection Center of Excellence” These will serve as “the focal point for matters related to civilian casualties and other forms of civilian harm resulting from military operations involving United States Armed Forces.”
In Washington’s East Room, President Joe Biden speaks. (Patrick Semansky/AP Photo)Give fuel to the fire
The NDAA entails large-scale spending, which is among many historical programs and packages. This includes the Consolidated Appropriations Act 2023. Signed December 29, 2009 by President Joe Biden, which channelizes $1.7 trillion in fiscal 2023 to a variety of spending programs.
Another initiative is the Biden administration’s Inflation Reduction Act, which ended up being a slimmed-down version of the president’s $2 trillion Build Back Better Act. It legislation Authorized New spending totals $433 billion
Domitrovic believes that while some aspects of the current economic landscape may be familiar to past administrations, the Biden administration has created a new set of fiscal circumstances almost without precedent.
“The change is spending. Unprecedented increases in government spending are certainly very recession-oriented. The function of such spending is to cause recessions, since government spending takes up resources that are in the economy,” He said.
Domitrovic also sees a negative effect in the government contracting of citizens who would otherwise work in the private industry and contribute to GDP growth.
“You make government contracts to take people out and busy them with government work. That’s negative economically, and then you buy their stuff instead of the real market action of the private sector. It’s all dedicated to eliminating resources from the private economy and making those resources inert in real economic transactions. That’s what a recession is,” Domitrovic spoke.
“Capital interacts with labor to create production. But businesses are becoming more reluctant to commit to capital and labor, and you’re seeing these big layoffs at Amazon. Keep removing resources from the economy, that’s a great way to start a recession,” He added.
The Epoch Times reached out to the White House in an effort to get comment.
Michael Washburn, a New York-based journalist who covers U.S.-related topics, is based in New York. He is a former journalist who specialized in financial and legal journalism. In addition, he hosts the weekly podcast Reading the Globe. His books include “The Uprooted and Other Stories,” “When We’re Grownups,” And “Stranger, Stranger.”
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