U.S. Economy Shrank 1.6% at the Start of 2022—Though Recession Is Not Imminent, Economists Say
TimeSep 09, 2022
US GDP's Early 2022 Dip Bigger Than Predicted
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Image copyright: AP/POOL/The Seattle Times [via TIME]
The Facts
The US Bureau of Economic Analysis (BEA) said on Wed. that US real gross domestic product (GDP) declined at a 1.6% annual pace, a slightly higher rate than previously estimated during Q1. Earlier projections had forecast a contraction of 1.5%.
The drop in GDP was the first since Q2 of 2020, during the height of COVID. In Q4 of 2021 the economy saw a brief recovery and grew 6.9% from the prior quarter.
The Spin
Republican narrative
Biden's $1.9T American Rescue Plan was like pouring gasoline on the inflationary fire. Had it been optimally sized, we would have fewer problems and less inflation. When the Fed raises interest rates to cool down the economy, there's a risk that demand and investment go down, which could leave Biden with a painful recession on his hands.
Democratic narrative
It's a bizarre argument that the Biden administration's American Rescue Plan is to blame for the 40-year high inflation rate. The US is in a better economic position than many other countries to overcome the current bout of inflation, which is being driven by global factors well beyond the control of the US president.
