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America’s economic past is littered with depressions and recessions, which destroyed jobs, bankrupted businesses and spread misery. But one downturn is not likely to make the history books: the recession of 2023. It’s the one that was widely predicted but has yet to happen and looks as if it never will.
Economic woes have dominated the news since the COVID-19 pandemic arrived with the force of a Category 5 hurricane. But the story of the U.S. economy over the past 3 ½ years is a chronicle of surprising success. Seldom has a perilous economic path been negotiated with such skill and foresight.
Presidents often have less effect on the economy than voters assume. But in this case, ample credit is due to Joe Biden and — surprise! — Donald Trump.
Republicans insist that “Bidenomics” has been a disaster. But the positive economic indicators are harder to miss than neon in Las Vegas. Inflation has fallen from its punishing heights. In June 2022, the consumer price index was up 9.1% over the previous 12 months. This June, the rate was 3%.
Is that figure unacceptably high? Not necessarily. In 1988, the last year of Ronald Reagan’s administration, which boasted of vanquishing inflation, the annual rate was 4.1%. In 2008, George W. Bush’s final year, it was 3.8%.
Progress against Biden-era inflation, it was feared, could come about only through a job-killing contraction. But the national unemployment rate in June was 3.6% — compared with 3.5% in February 2020, before COVID-19 shut down much of the economy. Here in Illinois, it’s at 4%, compared with a pre-pandemic level of 3.9%.
The gross domestic product grew at a solid 2.4% clip in the second quarter. Since Biden took office, the country has added more than 13 million jobs, greatly surpassing the number lost during the pandemic. The S&P 500 stock index has soared by 28% since October. If the overall picture is not economic nirvana, it’s nirvana-adjacent.
[ Editorial: Was it ‘Bidenomics’ that brought down inflation? ]
Americans are starting to believe the improvement is real. “Consumer confidence rose in July 2023 to its highest level since July 2021,” said Dana Peterson, chief economist at The Conference Board, citing its latest survey. “Greater confidence was evident across all age groups, and among both consumers earning incomes less than $50,000 and those making more than $100,000.”
The inflation that erupted in mid-2021 was partly the result of supply chain snafus caused by COVID-19. It was partly the result of the war in Ukraine, which reduced world supplies of oil and grain. But it was also the product of the drastic measures policymakers took to rescue the economy.
It’s easy to forget how close we came to the abyss. David Wilcox, a senior fellow at the Peterson Institute for International Economics, told The Washington Post: “Since World War II, there’s never been a contraction that even remotely approached the severity and the breadth of the initial collapse in 2020.”
But catastrophe was averted, thanks to two critical measures. First, Congress poured relief funds into the economy, starting with a $2 trillion emergency stimulus package passed with bipartisan support and signed by Trump as president. More stimulus measures followed, including a $1.9 trillion package pushed through by Biden shortly after he took office.
Equally important, the Federal Reserve cut interest rates to zero and opened the money supply floodgates. Chairman Jerome Powell committed the Fed to “using our full range of tools to support the economy.”
The dual strategy worked as well as anyone could have hoped. After entering a near-coma in the second quarter of 2020, the economy bounced back with astonishing speed and strength — and, aside from a brief stall last year, it has continued to grow.
Chicago Tribune Opinion
In the desperate days of 2020, most policymakers and Americans would have been happy to accept a spell of rising prices to avert an apocalypse. But the conservative doomsayers who predicted that $20 bills soon wouldn’t be worth the paper they were printed on have been proved wrong.
Progressives, on the other hand, have vilified the Fed for raising interest rates. At a March hearing, U.S. Sen. Elizabeth Warren, D-Mass., told Powell that when it came to fighting inflation, he had “only one solution: lay off millions of workers.” Oh, really? Since Warren’s tirade, the economy has added 732,000 jobs.
Our Washington policymakers often fall short when it comes to economic matters. But in one of the most challenging economic crises of our time, they responded with urgency and wisdom. Today, the economy is cruising along on the right track.
And it didn’t happen by accident.
Steve Chapman was a member of the Tribune Editorial Board from 1981 to 2021. His columns, exclusive to the Tribune, appear the first Thursday of every month. He can be reached at stephenjchapman@icloud.com.
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