Economy avoids recession, grows 2.4 percent – but falls short: CEI analysis

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GDP numbers released this morning show a healthy 2.4 percent annualized growth in the second quarter. CEI Senior Economist Ryan Young thinks it could have been even better:

“Today’s growth should have happened sooner. The reason for the delay is part of the larger story of COVID. For several years we had a healthy economy, like it is now. Then in 2020, the pandemic hit. People hunkered down to stay safe and re-emerged as vaccines came out.

“The problem is that Washington overreacted to the crisis. The Federal Reserve went into stimulus mode and grew the money supply by 40 percent in just two years. Congress and Presidents Trump and Biden spent more than $5 trillion on wish-list items often having nothing to do with COVID, from EV and chip subsidies to student loans.

“Washington’s crisis opportunism hoovered up capital that could have had other uses. This could slow down future growth. A billion dollars spent subsidizing Lordstown Motors or a Tesla factory – money spent now – can look good in today’s GDP numbers, but it also means a billion dollars less in circulation for startups in other industries that could prosper later.

“This story shows that America’s economy is strong enough to withstand both a pandemic and binge-spending politicians. But 2.4 percent growth should have happened sooner, and it should be faster. Congress can help by passing environmental permitting reform, loosening trade restrictions, and kicking its wasteful corporate welfare and industrial policy habits.”