Our country’s economic journey throughout 2022 is one for the books. We had the highest inflation in 40 years , the highest mortgage rates in 20 years , and the worst stock market declines in 14 years . People are still struggling to pay bills, reduce debt, and save money, with average weekly earnings adjusted for inflation down 3% year over year .
The dismal state of the economy blindsided many people last year, but we don’t have to be caught so unaware in 2023. Knowledge is power, and knowing what could happen this year might make a difference in your finances.
I believe that the burden of the inflationary recession will intensify this year. Expect to see the economy continue to correct from the consequences of Congress’s excessive deficit-spending that simply moved our money around, Biden’s overregulation that stifled energy production and other markets, and the Federal Reserve’s monetary mischief that manipulated markets through its bloated balance sheet.
Currently, the Fed’s balance sheet remains well over $8.5 trillion , not falling nearly fast enough after it peaked at $8.9 trillion in April 2022. Much of this stems from when the Fed’s balance sheet more than doubled due to pandemic-related shutdowns to help Congress afford massive spending that ballooned the national debt by more than $7 trillion over the last three years. Now, the debt sits at about $31.5 trillion .
Adding to the perfect storm is a regulation-happy president, Joe Biden, who hinders the ability of the free market to flourish, particularly in the areas of oil and gas, with his flawed green-energy agenda.
The vital ingredients for a suffering economy with continually high inflation and high interest rates are present.
The popular misery index (a measurement of economic distress on the everyday person), which uses the unemployment rate plus inflation, was above 10% in December — the highest rate since before the shutdowns in 2012. Given the projection of the economy in 2023, we can expect rising unemployment and elevated inflation as employers cut costs or raise prices to stay afloat.
We’ve already seen employment take hits in the household survey, which has shown net employment declined in four of the last nine months for a total increase of just 916,000 jobs added since March 2022. In short, we’re looking at a continued inflationary recession with higher interest rates in 2023. It won’t be pretty, but there’s a reason for hope: a divided Congress.
Republicans now have control of the House, and Democrats have control of the Senate and the White House. That division can create roadblocks to poor policies being pushed out of the Biden administration and the Democrat-controlled Senate, which has destroyed economic opportunities over the last two years.
But the other possibility is more costly executive orders from Biden as he seeks to push more green energy policies, such as the ESG investing scam or stopping permits for oil and gas, and other flawed initiatives. This would mean more blockades to free-market flourishing.
If the economy is prohibited from growing due to excessive regulation, taxation, and spending, we can anticipate that things will get worse before they get better. We’re in this mess because of 2020’s “shutdown recession” and subsequent government failures. The way out is the proven recipe of pro-growth, liberty-enhancing policies of less spending, taxation, and regulation while the Fed aggressively cuts its balance sheet.
This would unleash the economic potential of the productive private sector and get people working well-paid jobs while substantially reducing inflation.
In the meantime, hardworking people should minimize expenses, save for the storms ahead, and stay connected to family and the community for the smoothest possible sailing throughout what is sure to be a bumpy ride in 2023.
Originally published at Washington Examiner.
Vance Ginn, Ph.D.