Economists speak Word from the dismal science

Harry Truman once moaned: “Give me a one-armed economist!” He was tired of having his econ people say, “But on the other hand, Mr. President . . .”

Give-em-hell-Harry would be happy today. Most economists are in agreement on the nation’s business. (Another president, Calvin Coolidge, once said the business of America is business.)

Just a quarter of business economists and analysts expect the United States to fall into recession this year. This is a fraction of the number who said that as recently as six months ago. Remember when even econ types friendly to this administration were predicting possible recession? (See Krugman, P.) Those practicing the dismal science have made the herd (mentality) change directions. Because the good news keeps coming.

If the United States does have a recession, it’s more likely to be caused by external forces than domestic economic factors, according to the Associated Press.

This information comes from a survey conducted by the National Association of Business Economists released earlier this week. If there’s bad news to report, it’s that most expect inflation to rise at 2.5 percent, half a percentage point higher than the Fed target.

However, even that news is less bad than you might think, considering that as recently as June 2022, inflation stood above 9 percent, nickels cost 50 cents, the kids were told no eggs in the mornings—and a recession was almost seen as a guarantee.

This caused the Fed to raise its benchmark rate 11 times from March 2022 to July 2023 to bring inflation down from the highest it’s been in more than two decades.

Despite the rate hikes, the economy unexpectedly kept growing (!) and employers kept hiring (!) and layoffs were minimal.

A majority of respondents to the survey (70 percent) think the Fed has it “about right,” while some think it is keeping rates unnecessarily high. More than 20 percent even say the Fed should reduce rates further, because they apparently believe the country is out of the woods.

Fine. But what kind of disruptive “external” factors could come into play to change all this?

The chance of a conflict between Red China and Free China (aka Taiwan) is one. Even if it’s not an outright war, 62 percent consider such a conflict to at least be a “moderate probability.”

Then 97 percent see at least a moderate chance for conflict in the Middle East to drive oil prices above $90 per barrel. And there are well-founded concerns these conflicts will impact global shipping. In fact, this has already occurred thanks to Iranian-backed Houthi rebels in the Red Sea attacking ships that pass by.

Another 85 percent are worried about political instability here at home— before or after the upcoming presidential election. And 57 percent say undisciplined budget policies and a consistently unbalanced federal budget have created a larger delta between what is taken in versus what is spent, leading to instability in America’s finances.

Opinions can vary on what America needs to do in order to remain the world’s No. 1 economy, and there are any number of ideas that would be considered prudent to debate. Congress has failed time and again to hold serious debates on this issue, choosing instead to focus on impeachment, Hunter Biden’s apparent shenanigans, and unnecessary budget fights in order to deliver TV face time for the most extreme partisans.

Despite all of this, the fact remains: The U.S. economy is digging itself out of a hole that global inflation dug for us. And our 401(k)s are thankful for it.