Economist Stephen Moore said on Monday that the United States is already in a soft recession and that the real question is whether the Federal ReserveFederal Reserve can achieve a soft landing.
Moore, a visiting fellow at the Heritage Foundation, spoke about Varney Co. Monday, as well as former Treasury Secretary Larry Summers contradicted President Biden on Sunday, saying that a recession was almost unavoidable in the next two years.
Summers spoke on Bloomberg's Wall Street Week, noting that a recession could come sooner.
Last Monday, President Biden said that there was nothing inevitable about a recession, and he talked to Summers that morning.
Moore noted on Monday that he didn't agree with Biden nor Summers and that he believed that the U.S. was already in a mild recession.
For two consecutive quarters, a recession refers to a contraction in gross domestic product GDP activity, the broadest measure of goods and services produced across the economy.
In late April, it was revealed that the U.S. economy cooled markedly in the first three months of the year, as snarled supply chains, record-high inflation and labor shortages weighed on growth and slowed the pandemic recovery.
The Commerce Department said last month that real GDP decreased by an annual rate of 1.5% in the first quarter of this year, which was slightly higher than the first reading of the data.
Moore pointed out on Monday that the GDP data has not been good for growth, and Moore pointed out that the first six months of the year have been negative for growth. He said that the figure is not a catastrophic loss in GDP, but we are probably down 1% from where we were six months ago. He continued, when you add to that the fact that people's incomes are falling really fast in real terms, like $2,000 to $3,000 a year, that is a recession. We are in a recession. Moore said that he believes that the only real question is whether or not we are going to have a soft landing or a crash landing. Many economists, like Moore, are wondering whether the Fed can engineer the elusive soft landing - the sweet spot between tamping down demand to cool inflation and sending the economy into a downturn. Hiking interest rates can cause higher rates on consumer and business loans, which slows the economy by forcing employers to cut back spending.
The Fed raised its benchmark interest rate by 75 basis points for the first time in nearly three decades as policymakers intensified their efforts to cool red-hot inflation earlier this month.
Moore said that whether a soft landing can be achieved largely depends on the policy decisions that the Fed and the Biden administration make over the course of the next two to three to six months. He said that he is not hearing much positive out of the White House in terms of how to combat a recession, because they talk about higher taxes, more price controls, more regulations and more spending. That is going to make the problem worse. Federal Reserve Chairman Jay Powell earlier this month tried to assure Americans that higher rates won't cause a recession and that tighter policy is necessary to tame prices.