https://thehill.com/opinion/finance/4279277-joe-biden-fights-the-fed/
That’s the takeaway from the most recent report on the economy, showing that the third quarter grew more rapidly than expected in spite of rising interest rates. One reason is obvious: the president and his Democrat allies continue to pump up government spending, boosting growth, even as the Federal Reserve says a slowdown may be necessary to tame inflation “sustainably.”
Investors are not happy. Stocks are nearing correction territory, down roughly 10 percent from the highs of the summer. There are concerns that interest rate cuts, which might propel another earnings surge and another market rally, are not likely any time soon.
Simply put, soaring government spending has put the economy on a sugar high.
In the third quarter, total real GDP grew 2.9 percent year-over-year; federal outlays accelerated, growing 5.5 percent over the year-earlier quarter. It was the largest jump since the height of the pandemic, when Congress and the Trump administration threw everything possible into the economy to stave off a deep recession. It worked; the U.S. experienced a very sharp downdraft when the government decreed that businesses had to shut down, but then it bounced back quickly, thanks to enormous government stimulus spending.
What has gone so very wrong under President Biden is that federal and local government spending is still growing dramatically, even though the crisis has passed. Some of the increase in the most recent quarter stemmed from national defense spending, reflecting the war in Ukraine, which climbed 4.9 percent year-to-year in real terms. But more consequential was a 6.3 percent boost in nondefense spending. State and local government spending expanded 3.9 percent.
None of this is surprising. Joe Biden has a singular approach to every issue: spend more money, even as inflation eats away at real incomes.