Commentary
Four months ago, the Brownstone Institute commissioned a study from economists E.J. Antoni and Peter St Onge to answer two critical questions. First, what is the true rate of inflation over four years, considering factors excluded by the Bureau of Labor Statistics (BLS) and correcting for misreporting? Second, what impact does adjusting GDP against this new inflation rate have on economic output?
The report aimed to provide a more accurate assessment of the current state of the economic cycle, particularly in light of recent upheavals. It was time to reevaluate with a clearer perspective.
Adjusting GDP for inflation shows that the US has been in a recession since early 2022, with 7 out of the last 10 quarters experiencing negative economic growth. This period of recession has been masked by statistical inaccuracies.
The report highlights flaws in inflation calculations that became apparent during the COVID policy response, leading to uncontrollable inflation. Every sector, including housing, was affected by inaccurate assessments.
For example, the report criticizes the BLS’s method of evaluating housing costs and points out methodological errors in various sectors that the CPI fails to account for accurately.
The report also addresses issues with health insurance cost calculations and regulatory compliance adjustments, leading to a more comprehensive understanding of the true inflation rate.
These adjustments reveal that the perceived economic growth was merely inflation, challenging the notion of a thriving economy under the current administration.
Using the revised inflation data as the GDP deflator yields significantly different outcomes compared to the original data. Instead of a prolonged period of growth, the revised data points towards an extended period of decline.
In 2021, there was a modest growth as the country recovered from lockdowns. However, this trend was abruptly reversed in the first quarter of 2022 due to escalating inflation eroding the apparent growth. Consequently, a full-fledged recession emerged and has persisted without signs of abating.
According to business cycle theory, recessions are characterized by two consecutive quarters of real GDP contraction. While this criterion was met in 2022, the recession was not officially recognized due to the labor market’s apparent strength. Nonetheless, this study uncovers that the recession was indeed real and endured for the subsequent two and a half years. A conclusive assessment of the current year’s third quarter awaits the arrival of relevant data.
Amidst this economic turmoil, skepticism towards expert analyses and data interpretations has grown within American society. Whether pertaining to issues like COVID or climate change, many claims and models put forth by certified experts have been debunked. It is high time to extend this skepticism to economic matters, a stance that this study has adopted.
Most financial and economic analysts privately acknowledge the dubious nature of inflation and growth data spanning several years. However, mainstream media perpetuates the official numbers, leading to a widespread belief in an ongoing economic recovery. Yet, a closer examination reveals that this perception is unfounded, with even labor market indicators failing to paint a rosy picture upon scrutiny.
From a personal standpoint, the numbers presented in this study not only seem plausible but potentially understate the severity of the economic challenges. Unaddressed inconsistencies in government data, such as those related to industries like restaurants, cars, and groceries, as well as oversights in shrinkflation and new fees, further cloud the economic landscape.
Furthermore, the study refrains from excluding government spending from the GDP figures, a move that would significantly diminish the baseline output numbers and unveil a more profound recession. For instance, government expenditure accounted for a substantial 34% of the GDP calculation in 2023.
Implementing this adjustment could potentially unveil a shift from recession to outright depression, offering a more accurate portrayal of the current economic climate. Despite these findings, the study remains preliminary and aligns with existing evidence to date.
This study represents a pioneering effort to scrutinize the U.S. economy’s vitality over a four-year period with a focus on precision and reliability. The outcomes challenge official narratives but resonate with public sentiment, as consumer confidence remains markedly lower post-lockdowns.
The National Bureau of Economic Research, responsible for monitoring business cycle trends in the U.S., must acknowledge the mounting skepticism surrounding the data collection and reporting practices of government agencies. When conventional methods fail to capture the evolving economic landscape, it is imperative to reassess, regroup, and present a more transparent depiction that aligns with empirical evidence.
The viewpoints expressed in this article reflect the author’s opinions and may not necessarily mirror those of The Epoch Times. Please rewrite this sentence.
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