Joe Biden was quick to pat himself on the back after the latest numbers from the Bureau of Economic Analysis showed that the U.S. economy grew by 2.9% in the fourth quarter of 2022 and 2.1% for the entire year.
“Last quarter, our economy grew at a 2.9% annual pace – solid growth, even as we continue to bring inflation down,” Biden tweeted. “Our economic plan worked. And it still is.”
But according to the Heritage Foundation, the latest report “should have alarm bells ringing, not trumpets sounding.”
“That’s because economic growth is slowing down,” explains research fellow EJ Antoni. “Even the areas which contributed positively to gross domestic product (GDP) are not necessarily signs of prosperity. For example, business investment grew at only 1.4 percent in the fourth quarter, but that was almost entirely inventory growth. Nonresidential investment, a key driver of future economic growth, was up just 0.7 percent.”
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“Meanwhile, residential investment fell off a cliff,” Antoni continued, “dropping 26.7 percent as consumers were unable to afford the combination of high home prices, high interest rates and falling real incomes. No wonder homeownership affordability has fallen to the lowest level in that metric’s history.”
There was a gain in net exports, but that was largely a mirage created by a major slowdown in international trade. “Imports are simply falling faster than exports, which shows up as an increase in GDP.”
But probably most concerning to Antoni is the sharp decline in real disposable income in 2022, which exceeded $1 trillion.
“This is the second-largest percentage drop in real disposable income ever, behind only 1932, the worst year of the Great Depression,” he observed. “To keep up with inflation, consumers are depleting their savings and burning through the ‘stimulus’ checks they received during 2020 and 2021. Credit card debt continues growing, while savings plummeted $1.6 trillion last year, falling below 2009 levels.”
“As consumers continue depleting cash reserves and borrowing costs are rising, the growth in consumer spending will keep slowing. Since that accounts for roughly two-thirds of GDP, this doesn’t bode well for the economy,” Antoni continued.
So, once again, Biden is counting his chicks before they hatch, and what he wants us to believe is good news may actually be a warning sign that things are about to get really, really bad.
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