America's Talking - Episode 57: GDP shows 2nd consecutive quarter of negative growth

Episode Date: July 29, 2022

Join The Center Square's Executive Editor Dan McCaleb & D.C. Bureau Chief Casey Harper as they discuss: Recession? GDP shows 2nd consecutive quarter of negative growth. Federal Reserve announces rate hike to combat high inflation. Americans feeling pain of inflation as they begin back-to-school shopping. Inflation is hammering rural America, report shows. ‘Uncharted Territory:’ U.S. debt will nearly double GDP within 30 years, Feds say. Poll: 83% of parents are not planning to vaccinate their kids under 5 years old. Support this podcast: https://podcasters.spotify.com/pod/show/america-in-focus/support Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome to the America in Focus podcast powered by the Center Square. I'm Dan McAil, executive editor of the Center Square Newswire Service. America in Focus is a production of America's Talking Network. You can find all of the Center Square's great podcasts at Americastalking.com. Joining me today again is Casey Harper, Washington, D.C. Bureau Chief for the Center Square. We're recording this on Friday, July 29. Casey, it's been another tough week for President Biden when it comes to economic news. Second quarter GDP data indicates the U.S. is in a recession despite the president's claims. Let's start with the latest inflation news that was released just a few minutes ago. The U.S. Bureau of Economic Analysis just released data on its personal consumption expenditure,

another key marker of inflation. Tell us where it shows, Casey. Yeah, that's right. This sounds kind of technical, but it's one of those key markers that economists look at that the federal Reserve looks at. And probably one of the reasons they took the action they took this week, which we'll get into a little bit later. But this marker showed a 1% increase in prices just in the last month alone, the month of June. So that is definitely a big increase leading the way with something that we've talked about a lot on the podcast, where energy prices, which increased 7.5%. With gas prices going down, there may be some relief in that regard. But right now, we can see that this inflation marker shows what we've been seeing over and over and over again.

Inflation is at the highest level in decades. And it's important to note that these inflation numbers, you know, you might think that it would start to slow down because of a lot of the arguments have been made around it were that it was COVID-related supply chain and different things. Now there is Ukraine, which is not helped. But any thought that, you know, this is just going to slow down in the next couple of months, that argument, you don't really hear that anymore. it seems that's gone out the window and people are expecting more inflation for many months to come.

So we're heavy, heavy on economic news and what it means to everyday Americans this week. Inflation has been elevated now for well over a year, and Americans are just struggling. We'll talk about some surveys that came out this week and how Americans are dealing with inflation. but all indications are that this is here to stay with us for a little while anyway, huh? Yeah, that's right. I mean, we've seen this, I've been writing about this, talking about this on the podcast month after month. And, you know, there are some external factors like the war in Ukraine. There are still some, you know, supply chain issues. But, I mean, one of the biggest factors that doesn't get talked about as much that clearly shows no sign of stop.

No sign of stopping is federal spending. It's gone up and up. It's increasing. You know, We're going to talk a little bit later about just the budget and how out of control it's been. There was a big, you know, splurge, I guess you could say, around COVID, where there were multiple stimulus and COVID relief, you know, bills that were passed that really sent the deficits skyrocketing, but it's not going in a way anytime soon. Also, just yesterday, Casey, and you wrote about this at the center square.com. second quarter GDP showed negative growth. That would be the second consecutive quarter that we saw negative growth after first quarter figures came out.

That indicates that the U.S. is in a recession. But President Biden says we're not in a recession. Many economists disagree with that. What's happening here? Yeah, this is the big story of the week to me. And it's one of those, what is the definition, what the difference? definition of the word is, is, I mean, any, you know, two weeks ago, before this became political, any economists would have told you that six months or two consecutive quarters of negative GDP growth

was the definition of a recession. Actually, I got a lot of attention on Twitter just by, you know, Googling definition of recession. It pops up, you know, two consecutive quarters of negative GDP growth. I screenshot of that and shared it on Twitter and, you know, a lot of people were talking about it because I think that, you know, I mean, I don't want to call Biden out too much on this. I think all politicians do it. You try to kind of message around things.

You try to change the rules. You try to rework things to fit your political, you know, agenda, what you need to do. They all do it. But he's been, I think he's been caught pretty red-handed here, trying to change the definition of recession. So in the first quarter of this year, there was a 1.6% decrease in GDP.

And then in the last, the most recent quarter, there was a 0.9% decrease. So there's two consecutive quarters, and this isn't, you know, 0.1%, or a lot of, actually, a lot of economists said that this decrease wasn't going to happen. So these numbers were worse than, worse than expected. There's a lot of reasons for it, but it's not exactly accurate to say, you can't just blame this on COVID either, though. We already had the COVID dip.

We had the COVID, you know, GDP decrease. And then we recovered from it, actually, last year, we had GDP growth. And so everyone thought, okay, we're back on track. the GDP is growing again. But then the first quarter of this year, GDP decreased. And it's like, okay, you know, this is a good, what's going on. And then again, it's decreased. And so some of that has to do, I think, with less federal spending.

There's, you know, obviously the stock market's taking a hit. The oil markets are really in disarray for a few reasons. But overall, you know, we've seen from a lot of the data, small businesses are really worried about the inflation rate. They've put a freeze at hiring. They're worried they can't meet their costs. a lot of small businesses are afraid they're going to actually go out of business. So it's not fair to blame it all on inflation, but that is one major factor that is making Americans feel like they have less discretionary income and is making businesses feel like they better play it safe.

They shouldn't grow. They shouldn't expand. They shouldn't hire. And so it's just like it's a complicated thing, but overall it's not good. And we can get into the debate about whether it's a how you would define a recession, Dan, or not. But in some ways, that kind of is a distraction from whether we call it a recession or not, it's clear that a lot of Americans are hurting and a lot of small businesses are feeling the pain. Well, before we get into that debate, Casey, you want to make a couple of plugs.

You, of course, as you do every week, patted yourself on the back. Yes, I'm still sore from all that. Yeah, I'm sure it is. Plugging your social media, your Twitter account. That's right, number 33. What was that? Go ahead, Dan.

That's right. Follow Casey. at Tracy Harper 33. I'm curious, so what does it 33 mean? Oh, 33. Well, let's go in on it. It's actually, that's how many years Jesus was on the earth. So a little shout out to, you know, one true king.

My faith, nothing wrong. Big fan. Nothing wrong with that. And we are, as I mentioned, we are going to be heavy on the economy this week. Well, the way the economy is going, I think we can use some prayers for it, honestly. I think we all could, no doubt about that. But as I mentioned, the American Focus podcast is part of America's Talking Network. And if you're interested in the topic of inflation, the everyday economics podcast just released this morning on America's Talking Network.

You can find that at America's Talking.com with a nationally recognized economist Orfei Devungi. Check it out at America's Talking.com. That's the everyday. economics podcast. But now let's go back to this debate about what a recession is. Is this just political spin from President Biden in his administration saying that it's the quote unquote technical definition of a recession, two quarters of GDP negative growth? But it's not the real definition of a recession? Yeah, I got to say there's got to be some White House staffers that are dizzy right now from all the political spin and the spin factor.

going on. I mean, you can see a little bit why Biden could make this argument. The argument that doesn't sound as good, but is more true, is this recession is not as bad as other recessions have been recently in our country. And that is true. The negative GDP growth we have seen is not as bad as what we've seen in recent years. The way the economy is faring now, it's definitely not doing great, but it's not as bad as like in 2008 or something. So I can see why they would not want to equate what's going on now with like 2008 by saying, oh, it's not that bad. It's not a recession. But it is really political. And the other thing to remember is, you know, it's a midterm election year, right? And so that cannot be forgotten. All these, how the last thing you want to

be as an incumbent Democrat is going right down the line to November election and have every attack at against you be about the official numbers, say they're in a recession. recession. You're going to hear every attack ad, you know, talking about this because, hey, when, when, before the Democrats were elected, there was no recession and now there is a recession. You know, I mean, it's, that's an oversimplification big time. And we did have, you know, GDP loss during COVID and all that. But that's the political messaging. We're talking with political messaging. Coming in a midterm election year, you guys put us in a recession. Democrats are already facing a lot of trouble with, um, uh, the higher cost and inflation. So if we can if, if, if they, if they, they have to face inflation and recession. That might be a one-two punch that knocks out a lot of Democrats in tight races. And let's face it, while, you know, there are, this past six months, it's like six months to a year, year and a half, President Biden's entire term in office so far. There have been huge, huge issues.

You've got the southern border and President Biden, what Republicans call is open border policies. You've got the Supreme Court overturning Roe versus Wade. You've got these mass shootings and debates over gun rights. But when it comes down to it, American families, American voters, their economics, what happens with their pocketbooks, the high cost of inflation, I mean, that's the number one issue. And Democrats do face some big challenges when it comes to the midterm elections. But let's move on, although it's a very similar topic. The Federal Reserve announced for the second consecutive month a 0.75% interest rate hike. What's happening here?

Yeah, I just want to real quickly make a quick point on what you were saying, which is, you know, it's the political implications of the recession and inflation. And one thing to think about is a lot of the polling shows that voters trust different parties more on different issues, even if they don't necessarily vote with that party. And so, you know, voters trust Democrats more on climate change. The polls show that they trust, actually, they used to trust Democrats more on education. But in recent years, with everything that happened to Glenn Youngkin, that's actually evened out where voters trust Republicans and Democrats about even on education issues. recently elected governor of Virginia. Right, who kind of rose to success in large part because of a lot of the controversy going on with the education system in Virginia. Right.

And saying parents have rights when it comes to their children's education in public schools. Exactly. And so, but I say all that because when you look at the economy, voters trust Republicans way far more on the economy than they do Democrats. That's not, this is a factual statement. And so when the economy is not a big issue, that it's, doesn't help Republicans very much. When the economy is doing great, voters feel like they don't have to worry about the economy. They can make their decision based on other things. But when the economy is doing poorly like it is now, it's like, all right, we got to focus on the economy again.

And poll after poll has shown for years and years that voters trust Republicans more when it comes to creating jobs when it comes to stimulating the economy. And so that is another thing to keep in mind. And that's why Republicans are always messaging about the economy. They want to keep the conversation about the economy. And that's why you see so many Democrats trying to change the conversation to being about anything, abortion, climate, anything, because Republicans win on the economy in the majority of voters' minds. But on the Federal Reserve, the Federal Reserve actually did something more aggressive than what a lot of people expected a few months ago.

They announced another 0.75% interest rate hike increase. Now, I won't go into all the implications of what that means and why they're doing it. But the main reason thing to know about that is it is a way to, to combat inflation, and it is definitely an aggressive step. Because they just did it a similar rate hike last month. And when they did it last month, a lot of people said, wow, that was a little too aggressive. You're over-correcting. Now it's been a month, and they're already doing it again.

So, you know, the Federal Reserve, their main directives are to keep inflation low and to keep unemployment low. You know, unemployment actually has been pretty good in recent years. And so, but of course, as we've been discussing maybe at not, inflation's been really bad. So they've announced this rate hike. Whether it works or not, you know, we'll see it'll definitely, it'll almost certainly bring down inflation some. But the thing to watch out for here is that these kind of rate hikes hurt economic growth and always risk putting you into a recession. And depending on who you ask, we already are in a recession. So

it's not a good timing. Go ahead. And it just makes it makes the cost of borrowing money more expensive. If you're in the market to go buy a house, whether it's your first house or a second house or whatever, that makes it more expensive. If you're looking to buy a car, it makes it more expensive. And of course, it makes it more expensive for businesses to invest in infrastructure and growth as well. So there are significant implications when it comes to the overall economy with these interest rate hikes. Yeah, it is. And another shout out to Orfei in the everyday economics podcast because in my story at the center square.com, I mentioned some analysis from Orfei where he points out that one of the big drivers, the things that drove GDP growth down,

was a decline in residential investment. Right. And so that's part of what you're talking about right there is the cost of houses have gone up, of course, but also the cost to borrow money to buy the house has gone up. And we've seen a real, a sharp decrease in the demand for mortgages. So fewer people get a mortgage, you know, that's a major part of the economy, of course. And so that's just weird. That's a great thing to point out. And that's something that has been part of the conversation is the decrease in mortgage demand that has led to a worse economy. And a shameless plug one more time.

The Everyday Economics Podcast can be found at AmericasTalking.com sticking with the topic of inflation. Casey, it is July 29th. We're almost into August when parents start preparing their children to go back to school. And because of inflation, everything costs more. So back to school shopping is going to cost more. You wrote about a new survey this week. Tell us about that. Yeah, this is one of those, the impacts. A new morning consult survey that was released this week found that parents expect to spend more money and report being less excited about shopping for their children year. You know, with the price for their children this year. They say they're cutting back on expenses.

And it found that 19% of parents, quote, cannot afford all the back-to-school supplies they need. That number was just 9% in 2020. So it's more than double. The number of parents who are going into the school year saying, I cannot afford to buy my kids, everything they need, has more than doubled. I mean, according to the study, one in five parents that you see on the street is worried that they can't buy all the binders and notebooks. And actually, school clothes were the biggest, it was one of the biggest, you know, costs for. go back to school. But when they look at that, they say they're going to have to cut back. They're going to have to only buy the essential more than half, 57 percent of back to school

shoppers say they're concerned about inflation. So this is on people's minds. And we don't have to go back in the political complication. But when people are having to think about, you know, the politics and their spending habits in a different way when it comes to their kids, that is the kind of thing that really troubles incumbent members of Congress. Incumbent, incumbent, senators in the White House, of course. But parents are feeling this pain, and the number who are worried about her can't pay it is more than doubled. So it's pretty troubling. I guess you're out of the back-to-school buying a phase, Dan, is that right?

Do you remember those days and how that budgeting impacted you? Not really completely out of that. My kids are both graduates of high school, but they're both in college, and they're both going to be leaving to go back to school in the next couple of weeks. And we do, they're both going to be living in apartments off campus settings. So we do try to help them out with, you know, everyday living expenses or whatever. So no, I'm not really past it. I am thinking about it.

Of course, we're going to be paying rent on their apartments, paying tuition, that kind of stuff. So, no, I'm not out of it. I'm sorry, my opinion, you're just thinking, you know, the day you're not walking through the aisles of Walmart, putting red and blue folders in your shopping cart anymore. But not doing that. Yes, definitely spending more than I'd rather. You reported this week also on how inflation is affecting rural America. Tell us about that.

This is really interesting. This study found that this is from Iowa State University. And it showed that rural households are more vulnerable to inflation for a couple of reasons. And so, you know, it's found that in 2020, rural households post-tax income stood at 58,000, and about 82% of rural incomes went toward expenses, which left less discretionary income. But that in 2022, expenses rose by 18.5% overall for these rural families. Meanwhile, their earnings have not risen at the same rate, only 6%. We've talked about this a lot.

So their expenses rose 18% while their wages only rose 6%, which is only, you know, of course, only a third of that. So the net effect cut rural discretionary incomes by 49%, you know, negative 49%. So then that happened in just two years. That's the other thing. I mean, we see some of these trends sometimes over, you know, a decade or something. But to see such a sharp decrease in discretionary spending in just two years is serious. And urban households were less affected. largely because they make more money

and already had more discretionary income. And their expenses in urban areas actually rose less than in rural areas. So we talk about this inflation. And we talk about these inflation rates and how much everything went up. Every number we say is actually higher if you live in a rural area than if you live in a city.

So that is, I mean, that's a really interesting angle. It might be counterintuitive for people because we think of cities as more expensive. And of course they are. But the percentage changes. change is rising so much is rising faster in rural years and their wages are not going up. Yeah. That's interesting.

Just another sign that inflation is impacting all Americans, no matter where you live in the heartland or in, you know, major urban areas. Why don't we get off the subject of inflation in the economy? Casey, we've been extremely heavy on that this week. Of course, the news hasn't been great. We also wrote about a poll regarding the COVID-19 vaccines this week. And a significant majority of parents are not planning to vaccinate their underage children. What's going on there?

Yes, even as parents consider whether they're going to, how they're going to afford their school supplies, they're making another decision, which is, do I get my kids vaccinated? Do I have to get my kids vaccinated? and new polling found that parents aren't really excited about it, and especially parents with children, you know, five years old and younger, children under five, the majority of them have no plans right now to vaccinate their children. 83% of parents with children under five who are eligible for the vaccine, do not plan to get their kids vaccinated right now.

Only 7% say that their kids under five are vaccinated. Now, of course, you know, the vaccines have been really controversial. for a host of reasons, but especially so for kids because all the research has shown that kids are much less vulnerable to serious harm from, you know, from COVID, right? So of course, but FDA did grant emergency use authorization for Moderna and Pfizer COVID-19 vaccine for kids age of six months through four years old. So it's kind of a new debate, a new thing. It is approved now for kids as on you six months old. But most parents, for kids that age, say they're not interested or they're 27% say they're

going to wait and see. And 13% said they will only do it if they're required to. So you don't see a lot of excitement about this. There's been, you know, some people in the health, you know, health officials trying to push it. But overall, you know, I don't know, it's this is, I don't know. I mean, of course, kids get a lot of vaccines, but the parents raise, actually, The survey showed a lot of what the parents are worried about, and they raised, one of the main concerns they raised is that there hasn't been enough time to study it, basically. It's only been a few years, and we haven't let the health effects play out.

And that's one of the leading reasons that parents are hesitant. And we also know from, you know, more than two years worth of data that, one, the vaccines don't prevent people from getting COVID. We've had some high profile examples just in the last couple of weeks. President Biden, double vaccine, double boosted, contracted COVID-19. We'll end with that topic here in just a second. Governor J.B. Pritzker here in my home state of Illinois, double dose, double-boasted, got COVID-19. And the other part of it is we also know that even if you contract COVID, younger folks aren't. as impacted as much as, you know, senior citizens, older folks or those who have other

comorbidity. So I can understand the hesitation of parents, particularly parents, of younger children. Yeah, I mean, it's a real thing. And it doesn't just to extend to kids under five, you know, 40% with kids ages 5 to 11 say that they're, have been vaccinated. So if, you know, five to 11 year olds, 40% vaccinated. And that's 57% for basically teenagers, 12 to 17. So, you know, it does rise as kids get older. But there's something about the younger kids where parents are more hesitant. They feel like they're safer.

I think there's probably some concerns about how it might affect them developmentally. With any vaccine, there's always concerns about, you know, fertility and things like that. That's not, I mean, that's always a fear on vaccines, whether it's warranted or not. it's interesting to me that the older your kid gets, the more comfortable you feel giving in the vaccine. I mean, it says that nearly half of parents with kids ages 5 to 11 say they will only get vaccinated if they're required to do so

or they definitely won't. So, I mean, you know, I wonder how much of that is political, of course. Republican or Republican-leaning parents, 64% of them, who are themselves unvaccinated, are especially likely to say they're not going to get their, youngest kids vaccinated, which makes sense. But, you know, we're starting to see almost a 50-50 split,

which is kind of how our country split politically. The vaccine has become politicized. But a lot of people are saying, even if there is a requirement, they're not going to comply with it. Well, we only have about a minute left. Casey, let's close with President Biden. We talked on America and focused last week about President Biden testing positive for COVID-19. had mild symptoms. Of course, as I mentioned, he got two doses of the vaccine and then got double boosted, but still contracted it. He's also 79 years old, so he's in one of those vulnerable populations, but this week he tested negative and seems to be doing okay. Yeah, we should also note that Joe Manchin tested positive for COVID, so, you know, praying for both their healthy recoveries. But Biden made a first public appearance. It seems like he's doing fine, at least for now, so we're grateful for that.

Thank you for your insight, Casey. But that's all the time we have this week. A reminder to our listeners, you can find all of the CenterSquares podcast at America's Talking.com. Take a look. Please subscribe. There is no cost. This has been the America in Focus podcast for Casey Harper. I'm Dan McAulb. We'll talk to you next week.