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dean baker
Latest GDP Figures Show Rich Reaping Rewards as Working Class Continues to Suffer Under Trump
"People at the top are doing fine, people in the middle and lower income brackets are struggling a bit, to say the least."
Dec 24, 2025
President Donald Trump's allies this week hyped up newly released data showing that the US economy grew by more than 4% in the third quarter of 2025, but economists and journalists who dove into the report's finer details found some troubling signs.
Ron Insana, a finance reporter and a former hedge fund manager, told MS Now's Stephanie Ruhle on Tuesday night that there is a "split economy" in which growth is being driven primarily by spending from the top 20% of income earners, whom he noted accounted for 63% of all spending in the economy.
On the other side, Insana pointed to retail sales data that painted a very different picture for those on the lower end of the income scale.
"When you look at lower income individuals, nearly half of them are using 'buy-now-pay-later' for their holiday shopping," he said. "So we have this real split... People at the top are doing fine, people in the middle and lower income brackets are struggling a bit, to say the least."
Dean Baker, co-founder and senior economist of the Center for Economic and Policy Research, also took note of this split in the US economy, and he cited the latest data showing that real gross domestic income, which more directly measures worker compensation over total economic output, grew at just 2.4% during the third quarter.
Baker also said that most of the gains in gross domestic income showed up at the top of the income ladder, while workers' income growth remained stagnant.
The theme of a split economy also showed up in an analysis from Politico financial services reporter Sam Sutton published on Wednesday, which cited recent data from Bank of America showing that the bank's "top account holders saw take-home pay climb 4% over the last year, while income growth for poorer households grew just 1.4%."
Sutton said that this divergence in fortunes between America's wealthy and everyone else was showing up in polling that shows US voters sour on the state of the economy.
"In survey after survey, a majority of Americans say they’re straining under the pressure of rising living expenses and a softening job market," Sutton said. "The Federal Reserve Bank of Boston says low-income consumers have 'substantially' higher levels of credit card debt than they did before the pandemic. Even as growth and asset prices soar, Trump’s approval ratings are sagging."
Economist Paul Krugman on Tuesday argued in his Substack newsletter that one reason for this large disparity in economic outcomes has to do with the US labor market, which has ground to a halt in recent months, lowering workers' options for employment and thus lowering their ability to push prospective employers for higher wages.
"Trump may claim that we are economically 'the hottest country in the world,' but the truth is that we last had a hot labor market back in 2023-4," Krugman explained. "At this point, by contrast, we have a 'frozen' job market in which workers who aren’t already employed are having a very hard time finding new jobs, a sharp contrast with the Biden years during which workers said it was very easy to find a new job."
None of these caveats about the latest gross domestic product (GDP) data stopped US Commerce Secretary Howard Lutnick from going on Fox News on Tuesday night and falsely claiming that a 4.3% rise in GDP meant that "Americans overall—all of us—are going to earn 4.3% more money."
Lutnick: The US economy grew 4.3%. What that means is that Americans overall—all of us—are going to earn 4.3% more money. pic.twitter.com/SIFi99NRBX
— Acyn (@Acyn) December 24, 2025
In reality, GDP is a sum of a nation's consumer spending, government spending, net exports, and total investments, and is not directly correlated with individuals' personal income.
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‘Yikes’: New Jobs Data Further Undermines Trump Fiction of Thriving Economy
"The booming job market exists only in Donald Trump's demented head," said economist Dean Baker.
Dec 03, 2025
Economists on Wednesday expressed significant concerns after new data from global payroll processing firm ADP estimated that the US economy lost 32,000 jobs last month.
As reported by CNBC, small businesses bore the brunt of the job losses, as firms with fewer than 50 employees shed a total of 120,000 jobs, more than offsetting the 90,000 in job gains reported by firms with 50 or more employees.
The loss of 32,000 jobs in November marked a major miss for economists' consensus estimate of 40,000 jobs added on the month, and CNBC noted that the total number of jobs lost according to ADP data "was the biggest drop since March 2023."
Heather Long, chief economist at Navy Federal Credit Union, noted in a post on X that the job losses recorded by ADP were widespread across the US economy.
"Yikes," she wrote in reaction to the report. "Most industries were doing layoffs. The only ones still are hiring are hospitality and healthcare."
Long also said the disparity between small and large businesses in terms of job growth was more evidence that the US is experiencing a "K-shaped" economy in which those at the top of the economic ladder thrive, even as everyone else struggles.
"Larger companies are still hiring," she explained. "Smaller firms (under 50 workers) are doing the layoffs. It's been a very tough year for small biz due to tariffs and more selective spending from lower and middle-class consumers."
Kevin Gordon, head of macro research and strategy at the Schwab Center for Financial Research, observed that ADP hasn't reported such a big drop in small-business employment since October 2020, when the US economy was suffering through the peak of the Covid-19 pandemic.
Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, cautioned against reading too much into ADP data, although he added that "in the absence of up to date government payrolls, all other signs point to a further deteriorating labor market."
Charlie Bilello, chief market strategist at financial planner Creative Planning, argued that the ADP jobs numbers were part of a negative three-month trend in which the US economy lost an estimated 4,000 jobs per month, which he said was "the first three-month decline since the 2020 recession."
Bilello added that "a year ago, we were adding over 200,000 jobs per month."
Diane Swonk, chief economist at accounting firm KPMG, argued that the ADP report showed job losses in the US economy were "broad based" and "were accompanied by a cooling of wage gains" for workers who still have jobs or are switching from one job to another.
"Those with a job are clinging on, while those without are left wanting," she explained.
Dean Baker, senior economist at the Center for Economic and Policy Research, argued that the ADP report blows up President Donald Trump's spin about the health of the US economy.
"The booming job market exists only in Donald Trump's demented head," he wrote.
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'Not a Pretty Picture,' Expert Says of Trump Economy as Job Growth Grinds to a Halt
"It seems to me like we are looking at a labor market with near-zero labor force growth and near-zero real wage growth," wrote economist Dean Baker. "This means that real labor income in the economy is essentially flat."
Nov 12, 2025
Even without the benefit of recent federal jobs data, which the Trump administration has withheld amid the government shutdown, a prominent US economist argued Wednesday that it's clear the labor market under Donald Trump's leadership is increasingly grim.
Citing private figures that have been used to fill the void left by two consecutive missed jobs reports from the federal government, Dean Baker of the Center for Economic and Policy Research argued that "we can infer" weak job growth in September and suggested Trump or his aides "likely reviewed the September data and made a decision not to release it."
More broadly, Baker wrote, the payroll firm ADP "shows average private sector job growth of just 10,000 a month for the three months from July to October. Since this excludes the government sector, which likely shed jobs over this period due to federal layoffs (even pre-shutdown), the ADP data imply essentially zero job growth over this period."
"The other part of the story is that wage growth also seems to have slowed especially for workers at the bottom end of the wage distribution," Baker added. "It looks to me like we are looking at a labor market with near-zero labor force growth and near-zero real wage growth. This means that real labor income in the economy is essentially flat."
"That is not a pretty picture from the standpoint of the bulk of the population, and it does not describe a very stable path of economic growth," he continued. "When the AI bubble bursts, things might get really ugly really fast."
Baker's assessment came as CNN reported that President Donald Trump considered "traveling the country to give economy-focused speeches" as consumer sentiment craters, tariffs drive up prices, millions face skyrocketing health insurance premiums, and people across the country reel from the administration's assault on safety net programs.
Publicly, Trump has dismissed the notion that people are struggling economically under his administration, calling polling to that effect "fake."
"The economy's the strongest it's ever been," Trump falsely declared during a recent Fox News interview.
On Tuesday, the White House was widely mocked for citing extremely limited data from the food delivery company DoorDash to proclaim that Trump's agenda is "delivering real results for American families."
They’ve laid off so many people that the government is now getting its economic data from DoorDash.
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— Dare Obasanjo (@carnage4life.bsky.social) Nov 11, 2025 at 8:09 PM
Economist Paul Krugman wrote in a blog post on Wednesday that Trump is beginning to face "backlash against his attempts to gaslight the public about the true state of the economy," pointing to "the blowout Democratic victories in last week’s elections" as just part of that backlash.
"Once again, these attempts aren’t about putting a positive spin on the data. They’re just flat-out lies," Krugman wrote. "And Democrats should hammer those lies as proof not just that Trump is utterly dishonest, but that he’s completely out of touch with the reality of American life."
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Canadians Fume at Trump 'Tariff Bullying' as Carney Says Ottawa to Recognize Palestine
"It is time to align with human rights and international law. It is not a time to bend the knee," said the National Council of Canadian Muslims.
Jul 31, 2025
President Donald Trump said Wednesday that Canada's decision to conditionally recognize Palestinian statehood "will make it very hard" to complete a trade deal with the United States' northern neighbor, prompting widespread condemnation of the president's not-so-thinly-veiled threat.
On Wednesday, Canadian Prime Minister Mark Carney announced that Ottawa will grant formal recognition to Palestine at September's United Nations General Assembly (UNGA) in New York if the Palestinian Authority agrees to hold an election in 2026 and implement other democratic reforms.
Asked if he had consulted the U.S. about recognizing Palestine, Carney told reporters that "we make our own independent foreign policy positions."
Carney's announcement came as Israel—which is facing an ongoing genocide case at the International Court of Justice—is under increasing pressure to end its 663-day, U.S.-backed war and siege on Gaza, which has killed or maimed more than 220,000 Palestinians and fueled famine.
The far-right government of Israeli Prime Minster Benjamin Netanyahu, who is wanted by the International Criminal Court for alleged crimes against humanity and war crimes, is also openly pursuing plans to ethnically cleanse Gaza of Palestinians so it can be transformed into what Trump has described as "the Riviera of the Middle East."
Critically, Carney's announcement also came amid trade deal negotiations between U.S. and Canadian officials ahead of Trump's August 1 deadline for 35% tariffs on all imported Canadian goods not covered by the U.S.-Mexico-Canada Agreement.
"More evidence there's no limit to Trump's goal to use tariff bullying to chip away at the sovereignty of other countries... on any issue at all," Canadian economist Jim Stanford said Thursday on the social media site X.
"See also his harsh tariffs on Brazil for prosecuting Trump's close friend and coup schemer Bolsonaro," he added, referring to disgraced former far-right Brazilian President Jair Bolsonaro, who is also known as the "Trump of the Tropics."
What do we even think we are negotiating here? A "deal" that will be subject to constant threats to tear it up based on the arbitrary moment-to-moment mood swings of our trading partner's president? Trump's word is meaningless, why delude ourselves to believe he'd honour any "deal" we'd negotiate?
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— Luke LeBrun (@lukelebrun.ca) July 31, 2025 at 6:27 AM
Dean Baker, a U.S. economist who co-founded the Center for Economic and Policy Research, said on X: "Looks like Trump wants us all to pay higher taxes in support of Israel's mass murder in Gaza. Can someone explain to me how this is 'America First?'"
The National Council of Canadian Muslims (NCCM) said on social media that "Donald Trump has openly endorsed plans to ethnically cleanse and annex Gaza, along with his own outrageous ideas of making Canada the 51st state."
"As Canada strikes out an independent foreign policy by planning to recognize Palestinian statehood, Trump's attempt to suggest that the trade deal is in peril because Canada took a step in the right direction is just another transparent attempt at bullying from a man who changes the goal posts in every trade 'negotiation' in any case," the group continued.
"This is the time to stand strongly in support of Canadian values," NCCM added. "It is time to align with human rights and international law. It is not a time to bend the knee. Canada must push forward by imposing further sanctions on Netanyahu's government, reviewing the Canada-Israel Free Trade Agreement, applying a full two-way arms embargo on the [Israel Defense Forces], and helping those escaping Gaza arrive in Canada."
Although Canada's government insists that it has prohibited arms transfers to Israel since January 2024, research by four groups—World Beyond War, the Palestinian Youth Movement, Canadians for Justice and Peace in the Middle East, and Independent Jewish Voices—revealed this week that there have been at least 47 shipments from Canadian weapons manufacturers to Israeli armaments companies between October 2023 and July 2025.
Trump and members of his administration sought to assuage anxiety over U.S. tariff whiplash by promising bigger, better deals. In April, Peter Navarro, the top White House trade adviser, vowed that Trump would hammer out "90 deals in 90 days." However, 90 days later, the U.S. has finalized deals with around half a dozen nations, with the suspension of Trump's so-called reciprocal tariffs set to expire on August 1. After that, Trump is set to impose tariffs as high as 50% on many countries.
Trump's attacks on longstanding allies have prompted calls for solidarity among Western democracies as they move to recognize Palestine.
"By trying to bully nations out of recognizing Palestine, Trump is making himself the biggest hurdle to a two-state solution and a lasting peace," British Member of Parliament Ed Davey, who leads the center-left Liberal Democrats, said on the social media site Bluesky Thursday. "The U.K. must stand strong with Canada and our allies, we should recognize the Palestinian state right now. No more delays."
Earlier this week, U.K. Prime Minister Keir Starmer said Britain stands poised to formally recognize Palestine at September's UNGA if Israel does not take "substantive" steps to end its war on Gaza, allow aid into the strip, and renounce annexation of the illegally occupied West Bank. Trump signaled that he would not object to U.K. recognition of Palestine.
Around 150 of 193 U.N. member states already recognize Palestine, and this week France and Malta also said they would do so at the UNGA. On Thursday, Portuguese Prime Minister Luís Montenegro said that his government "is considering recognition of the Palestinian state."
There have been increased calls for Canada to find ways to lessen its dependence on the U.S.
"Clearly, August 1 is barely the beginning of this struggle for Canada's heart and soul, never mind a 'deadline,'" Stanford asserted. "Regardless of what happens this week, Canada must charge ahead on this epic mission to rebuild an economy that can survive independently of the U.S."
In a bid to gain some independence from their increasingly unreliable neighbor, Canada and Mexico are working to establish a new land and sea trade corridor that would completely bypass the United States, an initiative projected to cost the U.S. economy at least tens of billions of lost dollars, according to PPR Mundial. In addition to utilizing diverse modes of transport, including rail and maritime connections, the bilateral proposal is expected to incorporate advanced digital technologies including blockchain to manage customs and other formalities.
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Call What's Coming the 'Donald J. Trump Recession,' Says Economist
"While a recession may not be fully baked into the cards at this point, the risk is evident and it's almost entirely coming from Donald Trump's policies."
Mar 10, 2025
As U.S. financial markets continued their downward spiral on Monday amid rapidly mounting concerns about the impacts of President Donald Trump's erratic and destructive tariff policies, one economist argued that the president has almost single-handedly engineered economic conditions that could result in a recession in the near future.
"Past recessions have been the result of policy errors or disasters," Dean Baker, senior economist at the Center for Economic and Policy Research, wrote Monday. "The most typical policy error is when the Federal Reserve Board raises interest rates too much to counter inflation. That was clearly the story in the 1974-75 recession as well as the 1980-82 double-dip recession."
"Then we have recessions caused by collapsing financial bubbles, the 2001 recession following the collapse of the stock bubble and the 2008-09 recession following the collapse of the housing bubble. And of course, we had the 2020 recession because of the Covid pandemic," he added. "But now Donald Trump is threatening us with a recession, not because of something that is any way unavoidable, but rather because as president he has the power to bring on a recession."
Baker pointed specifically to Trump's decision to impose sweeping tariffs on imports from Canada, Mexico, and China, which the economist estimates will cost Americans roughly $2,000 per household as companies push the costs of the tariffs onto consumers in the form of higher prices.
Trump is going to give us a recession, because he can cepr.net/publications...
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— Dean Baker (@deanbaker13.bsky.social) March 10, 2025 at 12:04 PM
Retaliatory measures are also likely to inflict pain on Americans: On Monday, Ontario announced it would charge 25% more for the electricity it provides to Minnesota, New York, and Michigan in response to Trump's tariffs on Canadian imports, a move that's expected to hike electricity bills significantly for ratepayers in those states.
China, meanwhile, hit back at Trump Monday with an additional 15% tariff on U.S. farm products, including chicken, pork, soybeans, and beef.
Trump's tariff policies, and the widespread confusion surrounding their implementation, have sparked a sell-off on Wall Street and broader fears about the state of the U.S. economy as the labor market shows signs of stalling and consumer confidence plunges.
"While a recession may not be fully baked into the cards at this point, the risk is evident and it's almost entirely coming from Donald Trump's policies," Baker argued, noting that while the recession threat is "first and foremost" driven by tariffs, they "are just one possible route."
"The other is Elon Musk's DOGE team attack on the government. If there was ever any doubt, it is now clear that this outfit has nothing to do with increasing government efficiency," Baker wrote. "The direct impact of Musk's job cuts on both the budget and the economy is likely to be small. The bigger impact is the uncertainty they have created in large sectors of the economy."
"In short, Donald Trump has good reasons for telling us that his MAGA policies might give us a recession," he added. "It's hard to know how bad this recession would be, but it will definitely be the 'Donald J. Trump recession.'"
"Will the Trump slump turn into a recession? How will Trump lie and cheat his way out of it? Stay tuned."
Baker's assessment came a day after Trump declined to rule out the possibility of an economic recession in the U.S. this year and downplayed the effects of his tariffs, claiming without a shred of evidence that they will make the country "so rich you're not going to know where to spend all that money."
Trump previously insisted that the U.S. stock sell-off was attributable not to his chaotic tariff announcements, but to "globalists that see how rich our country is going to be and they don't like it."
Former U.S. Labor Secretary Robert Reich wrote Monday that just seven weeks after Trump's inauguration, "the bottom is falling out" of the U.S. economy.
"Stocks are plunging. Treasury yields are falling. Consumer confidence is dropping. Inflation is picking up," Reich wrote. "The cost of living—the single biggest problem identified by consumers over the last several years—is going up, not down. Trump's tariffs on steel and aluminum, and his threatened 25% tariffs on Canada and Mexico, are playing havoc with supply chains inside and outside America."
"Even before this Trump slump, only the richest 10% of Americans had enough purchasing power to keep the economy going with their spending. The bottom 90%—including most Trump voters—were barely getting by. The next eighteen months could be rough on millions of people," he continued. "Will the Trump slump turn into a recession? How will Trump lie and cheat his way out of it? Stay tuned."
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The Really Great February Jobs Report
If wage growth is now more or less in line with the 2% target, then the Fed can hold off on further rate hikes.
Mar 12, 2023
The failure of Silicon Valley Bank on Friday overtook the really big event of the day, the February jobs report. The 311,000 jobs were far more than I had expected. I thought the huge January number was a fluke of seasonal adjustments and unusually good winter weather. For that reason, I expected the February number to be very weak, not because I thought the labor market had crashed, but just as a correction to the high number in January.
I was wrong in a very big way. The January number was obviously real and the economy is still creating jobs at a very rapid clip.
This is somewhat concerning in that there is no way the economy can keep creating jobs at this pace without seeing some serious inflationary pressure, but this is where the other part of the good news story comes in. Wage growth slowed in February. The slower growth in February, combined with a downward revision to the January number, gave us a 3.6% annual rate of wage growth over the last three months.
This pace of wage growth is consistent with the Fed’s 2% inflation target. We had wage growth at this pace through much of 2018 and 2019 even as inflation was coming in slightly under the targeted rate.
I ordinarily would not be cheering slower wage growth, but the reality is that the Fed is determined to bring inflation down towards its target. If wages are growing at a pace that is faster than is consistent with its target, it will keep raising rates, and throwing people out of work, until wage growth slows.
If wage growth is now more or less in line with the 2% target, then the Fed can hold off on further rate hikes. Hopefully, it would then allow the economy to continue to grow with the unemployment rate remaining near 3.5%.
Of course, we do need to see real wage growth and inflation has been running faster than 3.5%. However, there are good reasons for believing that inflation will be slowing in the months ahead. Most importantly, we know that inflation in rents will slow sharply, as private indexes measuring rents of units coming up on the market have showed little or no inflation in recent months. The CPI rent index, which measures the rent of all units (both those that come up on the market and those with a continuing tenant) follows these indices with a lag of 6-12 months.
It is also likely that we will see further drops in many of the supply chain goods, most importantly cars, where temporary shortages sent prices soaring in the pandemic. This will help put downward pressure on inflation in goods, and also services like car repairs, where the cost of goods is a large part of the price.
And, we are also likely to see less inflation in food prices. The wholesale prices of many items, most notably eggs, has fallen sharply in the last couple of months. This should show up in lower prices in stores.
If we have a story where wages are rising at a 3.6% annual rate, and inflation falls to under 2.5%, then we would be seeing a respectable pace of real wage growth. We can hope for better, and also that we continue to see disproportionate growth at the bottom, but low unemployment and modest real wage growth is a pretty good picture.
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As Debt Ceiling Alarm Sounded, GOP Accused of Plotting 'Terrorist Attack on the Economy'
"They have the tiniest majority of one house and they are prepared to use it to get concessions they know are incredibly unpopular," one economist lamented.
Jan 13, 2023
As Treasury Secretary Janet Yellen warned Friday that the United States is likely to reach its arbitrary borrowing limit next week, progressives denounced congressional Republicans for threatening to use a debt ceiling standoff to force cuts to popular federal programs including Medicare and Social Security.
"They have the tiniest majority of one house and they are prepared to use it to get concessions they know are incredibly unpopular," Dean Baker, co-director of the Center for Economic and Policy Research, told The Washington Post. "It would be a terrorist attack on the economy."
Yellen announced that once the outstanding debt of the U.S. hits the statutory limit of $31.4 trillion—an event projected to happen on January 19—the Treasury Department will start repurposing federal funds to delay the date the government runs out of money. Until Congress raises the debt limit, the Treasury cannot borrow additional money, including to pay for spending that has already been authorized.
In a letter to congressional leaders, Yellen wrote that "the use of extraordinary measures enables the government to meet its obligations for only a limited amount of time," possibly through early June. She implored Congress to "act in a timely manner to increase or suspend the debt limit," warning that "failure to meet the government's obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability."
House Speaker Kevin McCarthy (R-Calif.) suggested—before the GOP won its slim House majority during November's midterms—that if elected to lead the chamber, he would refuse to lift the country's borrowing limit unless Democrats agreed to slash the social safety net and climate investments in return.
To secure enough votes to win his drawn-out battle for the speaker's gavel, McCarthy made undisclosed promises to far-right lawmakers, including several House Freedom Caucus members who have expressed opposition to raising the debt ceiling even if all of their demands, from shredding vital social programs to passing draconian immigration restrictions, were met.
The fight over the debt ceiling represents one of McCarthy's "most difficult balancing acts," CNN noted recently. The California Republican will "need to work with Senate Democrats and President Joe Biden to cut a deal and avoid economic catastrophe without angering his emboldened right flank for caving into the left."
McCarthy told reporters Thursday that "he hoped to 'sit down with [Biden] early' to work through a number of outstanding fiscal issues, potentially including the looming need to raise the debt ceiling," the Post reported. "In doing so, McCarthy reaffirmed Republicans' interest in seeking an agreement that could cap spending in exchange for votes to address the country's borrowing cap."
"We've got to change the way we're spending money wastefully in this country," McCarthy said. "And we're going to make sure that happens."
Notably, Capitol Hill's deficit hawks do not support reducing the Pentagon's ever-expanding budget or hiking taxes on the rich to increase revenue. On the contrary, the first bill unveiled by House Republicans in the 118th Congress seeks to rescind most of the Inflation Reduction Act's roughly $80 billion funding boost for the Internal Revenue Service—a move that would help wealthy households evade taxes and add an estimated $114 billion to the federal deficit.
A 2011 debt ceiling standoff enabled the GOP to impose austerity and also resulted in a historic downgrading of the U.S. government's credit rating, but the country has never defaulted on its debt. Economists warn that doing so would likely trigger chaos in financial markets, leading to millions of job losses and the erasure of $15 trillion in wealth. Knowing that a painful recession is at stake, "many leading Republican lawmakers are demanding that their new House majority use the debt limit as leverage to force the Biden administration to accept sweeping spending cuts that Democrats oppose, creating an impasse with no clear resolution at hand," the Post reported.
According to CNN, some Republicans—fearful of both a disastrous default and political backlash for attacking popular programs—remain uneasy about using the debt ceiling as a bargaining chip, recalling how then-Rep. Paul Ryan's (R-Wis.) proposal to privatize Medicare "became fodder for attacks that depicted him rolling an elderly lady in a wheelchair off a cliff."
Sen. Elizabeth Warren (D-Mass.), however, has warned that GOP lawmakers desperate to win the White House in 2024 will "blow up the economy" and run ads blaming Biden for it.
The Biden administration on Friday urged Republicans to drop any plans they have to hold the nation's economy hostage, saying it has no intention to conduct debt ceiling negotiations and calling on lawmakers to raise the nation's borrowing limit to preserve its credit.
"We have seen both Republicans and Democrats come together to deal with this issue," White House spokesperson Karine Jean-Pierre told reporters. "It is one of the basic items that Congress has to deal with and it should be done without conditions."
In a joint statement, Senate Majority Leader Chuck Schumer (D-N.Y.) and House Minority Leader Hakeem Jeffries (D-N.Y.) said Friday that "a default forced by extreme MAGA Republicans could plunge the country into a deep recession… Democrats want to move quickly to pass legislation addressing the debt limit so there is no chance of risking a catastrophic default."
As many observers pointed out repeatedly in the aftermath of the midterm elections, Democrats had the power to prevent this high-risk game of brinkmanship from proceeding any further by raising the debt ceiling—or abolishing it altogether—when they still controlled both chambers of Congress.
Despite ample warnings from Warren and other progressive lawmakers and advocacy groups, conservative Democrats refused to take unilateral action during the lame-duck session.
In the absence of congressional action, Yellen—who has supported proposals to permanently eliminate the federal government's borrowing cap as most countries around the world have done—still has the authority to avert an economic calamity by minting a trillion-dollar platinum coin.
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US Jobless Claims Jump as Fed Shoves Economy to 'Precipice of Global Recession'
One expert called on Powell "to think twice before plunging our economy into a wholly avoidable recession and completely undoing one of the strongest job recoveries on record."
Oct 06, 2022
Labor Department data published Thursday showed that new applications for unemployment benefits jumped by 29,000 last week, a possible signal that the job market is slowing as the Federal Reserve continues to aggressively hike interest rates and brush off warnings of a devastating recession.
For the week ending October 1, total initial jobless claims were 219,000, more than analysts expected and up from 190,000 the previous week. The weekly increase in unemployment applications was the largest since June, according to the new federal numbers, though the job market remains strong overall for the time being.
"The last thing families need right now on top of high inflation is a recession."
Around 1.4 million people were receiving unemployment benefits as of the week ending September 24, the Labor Department said.
The unemployment figures were released a day ahead of the Friday publication of September's jobs report, which could provide a better indication of how the labor market is handling the Fed's efforts to curb inflation by tamping down demand--an approach that many economists have said is misguided and risks mass job loss.
During a press conference following the Fed's policy meeting last month--when the central bank opted to impose another large rate increase--Chair Jerome Powell acknowledged that rate hikes are likely to fuel a rise in layoffs but said "that is something that we think we need to have."
Mike Mitchell, director of policy and research at the Groundwork Collaborative, voiced his disagreement in a statement Thursday.
"The last thing families need right now on top of high inflation is a recession," said Mitchell. "Tomorrow's jobs report could show the early impacts of the Federal Reserve's aggressive rate-hiking approach."
"Continuing down this path risks leaving millions of people, disproportionately lower-wage workers and workers of color, without a job or with smaller paychecks," Mitchell added. "We urge Chair Powell to think twice before plunging our economy into a wholly avoidable recession and completely undoing one of the strongest job recoveries on record."
The already-slim chances of the Fed engineering a "soft landing"--a sharp reduction in inflation without an accompanying recession--have dimmed further in recent weeks amid evidence that prices remain stubbornly high even as rate increases take their toll on the U.S. economy and ripple around the world, particularly in poor countries.
Powell's decision to risk a global recession to tame inflation has drawn growing criticism from economists in the U.S. as well as international institutions such as the United Nations, which earlier this week urged the Fed to stop raising interest rates.
Dean Baker, senior economist at the Center for Economic and Policy Research, also argued for a pause after the Fed's September meeting, warning that the central bank's policy approach risks "throwing the most disadvantaged out of work."
"When the Federal Reserve board hiked interest rates by another three-quarters of a point this week, the move was widely applauded by the business press. The rate hike showed the Fed's commitment to fighting inflation," Baker wrote in an op-ed for The Guardian. "While this is arguably true, it also showed the Fed's willingness to make the most disadvantaged groups pay the price for slowing a burst of inflation that they did not cause."
While some prominent members of Congress, including Sen. Elizabeth Warren (D-Mass.), have been sharply critical of the Fed's rate-hiking frenzy, progressive economists have voiced concern at the lack of pushback from lawmakers as the Biden administration stands by the central bank.
"I absolutely want my member of Congress weighing in on my behalf, saying, you know, 'Cool your jets, Powell. Like, step away from the bar, have a glass of water, and think this one through,'" Lindsay Owens, executive director of the Groundwork Collaborative, said in an interview with Marketplace on Wednesday. "Take a look at those JOLTS numbers we saw yesterday--huge drop in job openings. Maybe we can hold off for a minute on the next round of rate hikes."
"I think Powell's interest rate bender has us on the precipice of global recession," said Owens. "He is really going hard on rate hikes. And the consequences could be tremendous for so many."
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Ignoring Pain for Workers, Bloomberg Editorial Openly Endorses Fed-Induced Recession
The prominent business publication founded by billionaire Michael Bloomberg urged the Federal Reserve to "show it understands" the need for more layoffs and lower wages.
Sep 21, 2022
With the Federal Reserve expected to impose another large interest rate hike on Wednesday, the editorial board of Bloomberg openly encouraged the U.S. central bank to demonstrate that it is willing to "cause a recession" in order to get sky-high inflation under control.
Critics were quick to note that the Wednesday editorial, which claims "wage growth will need to slow" and unemployment will need to rise for inflation to come down, doesn't grapple with the severe damage a recession would inflict on workers who would face job losses, pay cuts, and other consequences in the case of a Fed-induced downturn.
"This editorial doesn't mention workers, families, and communities--the lifeblood of our economy and the people who will bear the brutal costs of a recession."
"Imagine my absolute shock that this editorial doesn't mention workers, families, and communities--the lifeblood of our economy and the people who will bear the brutal costs of a recession--at all," Claire Guzdar, managing director of campaigns and partnerships at the Groundwork Collaborative, wrote in a sarcasm-tinged Twitter post.
The editorial from Bloomberg, a publication founded by billionaire Michael Bloomberg, argues that while the Fed's stated goal of lowering inflation without hurling the economy into recession is "a worthy goal," reining in runaway price increases "almost always involves a temporary contraction of output together with higher unemployment."
"The central bank can't afford to equivocate about the need to slow the economy," the editorial continues. "Wage growth will need to slow substantially for inflation to gradually settle back at the Fed's 2% target. That, in turn, is likely to require short-term interest rates that peak at well over 4% and, unfortunately, a somewhat higher rate of unemployment. The Fed surely understands all this. But it needs to show it understands--and won't balk at the prospect."
In his recent public remarks, Fed Chair Jerome Powell has hardly been coy about his willingness to push the economy into recession and cause "pain" for households and businesses in his effort to tame inflation.
"Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions," Powell said during his closely watched speech in Jackson Hole, Wyoming last month. "These are the unfortunate costs of reducing inflation."
By endorsing a recession as an acceptable outcome in the fight against inflation, Bloomberg's editorial board joins a group of media outlets, analysts, and pundits that economist Dean Baker has dubbed "the recession lobby."
"There is a large recession lobby in Washington these days that seems to view a recession as a positive good for the economy and society," Baker, senior economist at the Center for Economic and Policy Research, wrote in a blog post earlier this month. "The basic story is that we have seen a big jump in inflation associated with the pandemic and the war in Ukraine. They argue that a recession will be needed to bring inflation back down to acceptable levels."
"I, and others, have pointed out the enormous human costs associated with a recession," Baker added. "Unemployment is traumatic for everyone, but we know that the people who are most likely to lose their jobs in a recession are those who are most disadvantaged in the labor market, such as Blacks, Hispanics, people with less education, and people with a criminal record."
The Bloomberg editorial was published hours before the Fed's announcement on its latest interest rate hike, which is expected to be 75 basis points following a hotter-than-expected August inflation reading.
Economists have warned for months that the Fed's rate-hiking frenzy, which other powerful central banks around the world have replicated, risks a destructive global recession. The World Bank cautioned last week that a worldwide recession is becoming increasingly likely as interest rate increases take their toll on demand.
Writing for Project Syndicate last week, Baker and Nobel Prize-winning economist Joseph Stiglitz called on the Fed to pause its rake hikes, arguing that "it would be irresponsible for the Fed to create much higher unemployment deliberately."
"With inflation and inflationary expectations already dampening," they wrote, "the Fed should be assigning more weight to the downside risk of additional tightening: namely, that it would push an already battered U.S. economy into recession."
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Recession Fears Spark Calls to Stop Hiking Interest Rates and Rein In Corporate Greed
"As Americans stare down the abyss of a potential recession, Fortune 500 c-suite executives are doing better than ever," noted one critic, "while their workers' wages have severely lagged behind."
Jul 28, 2022
As new government data on Thursday stoked fears of a looming recession--and even led to some claims that the nation is already experiencing one--progressives renewed calls for the Federal Reserve to stop hiking interest rates and policymakers to take on the corporate profiteering driving inflation.
"Reining in corporate greed is the key to bringing down costs for families and kickstarting economic growth."
The Bureau of Economic Analysis at the U.S. Department of Commerce released gross domestic product (GDP) figures that show two consecutive quarters of negative growth, which prompted some Republican lawmakers--hopeful to regain control of Congress later this year--to declare that "America is in a recession" and it is the Democrats' fault.
While two straight quarters of negative growth is often seen as a signal of recession, it is not that simple. Harvard University economist Jason Furman pointed out on Twitter Thursday there is "well over a 50% chance that Q1 and/or Q2 gets revised to positive."
"That's part of why NBER doesn't rely on advance GDP to call recessions," Furman added, referring to the National Bureau of Economic Research.
Alex Durante, an economist with the Tax Foundation think tank, told The Hill that "there's this perception, and people are not wrong to have it--it's probably even in my economics textbook from college--that it's two negative quarters of GDP that NBER uses to determine if there's a recession. That's actually not completely true. It actually looks at a wide variety of economic indicators to make that designation."
"They'll look at employment, personal income, durable goods, housing permits, so the GDP is certainly part of it, but they're looking at other indicators, as well," Durante explained.
As Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research (CEPR), detailed Thursday:
The modest drop in GDP reported for the quarter is not good news, but it was hardly a surprise. It also was entirely due to inventory quirks, which will not be repeated in future quarters. Consumption is still growing at a respectable pace, as is investment.
The Fed has been raising interest rates ostensibly out of concern that the economy was growing too fast, causing inflation. This report should help to stem those fears. While people are apparently not so concerned about a recession to keep themselves from taking trips and going to restaurants, they are still not spending down their pandemic savings. The sharp drop in the inflation rate reported in the core [Personal Consumption Expenditures] deflator should also alleviate concerns about a wage-price spiral.
CEPR co-founder and co-director Mark Weisbrot argued in a Thursday opinion piece for MarketWatch that the Fed--which on Wednesday hiked interest rates for the second straight month--will be to blame if there is a recession.
"As many economists have noted, the vast majority of the increase in inflation that we have seen over the past 18 months has been a result of external shocks, most important the war in Ukraine, which has raised food and energy prices (the CPI energy index rose 41.6% over the past year from June); and the economic disruptions caused by the pandemic," Weisbrot wrote.
"Some of these prices have begun to reverse; and in any case it's difficult to see how the Fed's interest rate hikes are going to lower these prices, as Fed Chair Jerome Powell stated last month," he continued.
Critics of the Fed's interest rate hikes--from Sen. Elizabeth Warren (D-Mass.) and Rep. Pramila Jayapal (D-Wash.) to economists who formerly served in the federal government like Robert Reich and Claudia Sahm--have called on the central bank to rethink its approach, and some have taken aim at Powell.
Rakeen Mabud, chief economist and managing director of research and policy at the Groundwork Collaborative, said Thursday that the "GDP report makes it crystal clear that Jerome Powell is willing to push millions out of work and throw away our economic recovery in the name of an arbitrary 2% inflation target he doesn't even believe he can hit."
"We can all agree that fighting inflation should be a top priority," she added, "but asking the workers and families who have been hit hardest by rising prices to also bear the brunt of a potential recession is not just cruel--it's bad policy."
The GDP report came less than 24 hours after Senate Majority Leader Chuck Schumer (D-N.Y.) and Sen. Joe Manchin (D-W.Va.) announced the Inflation Reduction Act, compromise legislation on climate, healthcare, and taxes. While some progressives have concerns about the specifics on climate, others called on congressional Democrats to swiftly pass the budget reconciliation package, which follows months of obstruction by Manchin.
"Sky-high inflation is a major contributor to the economic slowdown, and nothing is driving up costs more on everyday families than corporate greed," said Kyle Herrig, president of the government watchdog Accountable.US, in a statement Thursday.
"Across industries, we've seen major corporations continue to post record high profits and approve billions of dollars in shareholder giveaways while disingenuously claiming to have no choice but to raise prices so high," he noted. "As Americans stare down the abyss of a potential recession, Fortune 500 c-suite executives are doing better than ever, averaging over $18 million in compensation while their workers' wages have severely lagged behind."
According to Herrig:
Reining in corporate greed is the key to bringing down costs for families and kickstarting economic growth, and fortunately Congress has the opportunity [to] do it. Passing the Inflation Reduction Act will ensure corporations will finally begin to pay their fair share in taxes. This bill will put billions of dollars more into the pockets of Americans by reducing the leverage Big Oil, health insurance, and drug companies have to charge whatever they please--all while creating thousands of new jobs. Congress must not squander the best opportunity they may have for years to create an economy that works for everyone, not just billionaires and greedy corporations.
Unrig Our Economy campaign director Sarah Baron similarly asserted that the legislation "is a significant step towards combating corporate greed and making an economy that works for working people," highlighting the same provisions as Herrig.
"The vast majority of Americans rightly blame corporate greed for driving inflation, so it is heartening to see Democrats unite around a bill that addresses the issue at its source," Baron said. "As the bill is considered by Congress, Unrig Our Economy urges all members to decide where they stand--with corporations or with the hardworking constituents they were elected to represent."
Groundwork Collaborative executive director Lindsay Owens also backed the bill, saying that "the Inflation Reduction Act gets it exactly right: We bring down costs for families by making needed public investments, not pulling back on spending when we need it most."
"We bring down energy costs when we invest in clean energy and lessen our dependence on Big Oil profiteers. We bring down healthcare costs when we use public power to counter Big Pharma and get a fair price for seniors. And we strengthen our democracy and our economy when the largest corporations contribute to these investments, instead of buying politicians to oppose them," she added. "Congress should send the Inflation Reduction Act to the president's desk as quickly as possible."
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