What I read this week...

This week the BEA released the Q2 GDP print. But dictionary definitions of a recession aside, and regardless of the numbers, the fact is that Americans are facing tough times with higher prices from groceries to gas.

That said, I believe the underlying numbers, and the steps we are taking to help the economy, actually tell a very different story.

First, we must understand how we got here. In 2020, we had a black swan event in Covid-19, and in response, we printed trillions of dollars to stimulate an economy that had been effectively shut down. 

As a result of the stimulus, the economy actually appeared quite strong, particularly over the course of 2021, when in reality we inadvertently distorted the economy’s true supply-demand equilibrium. Supply was out of whack from Covid shutdowns, demand was propped up by stimulus checks, and inflation went through the roof. 

Only recently has the Fed tried to bring all of this back into check by raising interest rates to quell demand and initiating quantitative tightening. Some are saying this will hurt the economy instead of help it, but I believe these actions are necessary to bring inflation into check.

In the end, it really doesn’t matter what we call the state of our economy – whether we are in a recession or not. What matters is that the country is largely headed in the right direction. Employment numbers are good, wages are increasing, savings are robust, and as the free money cycles out of the system, we’ll see labor participation increase too. 

The bad news is that both the Democrats and Republicans will try to use this GDP print to gain political ground. But I hope Americans will not be distracted by political posturing and media headlines. Congress and the Fed need to remain focused on doing what’s right for American families by advancing the best policies to grow our economy and restore American global leadership.