The U.S. economy grew 1.1 percent in the first quarter of 2023, according to the Bureau of Economic Statistics. It may seem underwhelming, but it could be worse, considering all Washington’s blundering, says CEI Senior Economist Ryan Young:
“The first quarter’s tepid GDP growth is surprisingly good, considering all that Washington has done to the economy since the pandemic hit. The economy’s biggest problem now is inflation, a direct result of the government’s COVID-related stimulus. The price of stimulus today is always a slowdown tomorrow, and now it’s tomorrow.
“Trillions of dollars of stimulus spending and money creation caused the inflation that the Federal Reserve is still struggling to bring down. Rising interest rates are a necessary part of that effort, but they are a major reason why GDP growth, at 1.1 percent, is only about half what it should be. Stimulus is never free.
“It could be worse. Growth is still positive, and the labor market remains strong. That should give the Fed the courage it needs to keep raising rates and bringing inflation down.
“Much of the pain from Washington’s COVID spending and regulating binge will come in the future. All that debt will have to be repaid from future taxes, which means less money left over for productive investments. Today’s new regulations and initiatives will slow down long-term growth in the years ahead. For now, at least, things are good enough for the Fed to continue focusing on inflation, its most urgent problem. People deserve better, but things could be much worse.”