Jonathan Williams, ALEC Executive Vice President and Chief Economist, spoke with Ed Dean. The Ed Dean Morning Show for Florida’s AM 600 & FM 101.1 About the state of the economy with the latest reports on GDP and economic growth.
It’s actually a mixed bag and a big drop from the fourth quarter that came in below consensus estimates’ expectations. Some of the positives are that consumers still drive economic growth through their purchases. They still have savings from pandemic-related payments or their wages have risen and they may spend more. The consumer spending portion of GDP is one driver that keeps it in positive territory. But whenever you look at the GDP growth number, remember that GDP includes government spending.
In the strange accounting system here in Washington DC, government spending automatically grows GDP. We know that over the long term they have accumulated nearly $32 trillion in national debt that will have to be paid off at some point. We’re paying it now because of high inflation, and we’ll have to pay it again when we pay the bills, so it’s not a net positive. We are juicing the economy in the short term to keep the numbers positive. But those bills will come in eventually, which is something to keep in mind when talking about GDP numbers.
On the negative side, two things are really dragging down GDP. One is obviously real estate. When interest rates rise, we pay the government debt penalty — any excess spending — which affects real estate markets across the country. Now the most important drag on GDP is business investment, which has declined.