The U.S. Economy is Shrinking

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     Prices rose even more in September than the previous month. This is a good example of the increasing inflation in America and the effect it has on the U.S. economy. Central banks started raising interest rates and prices of goods rose. Policymakers need to do something about this, as the multiple interest rate hikes will eventually lead to an economic recession. Living rates and expenses are significantly high right now and inflation is the biggest issue for the American economy at the moment. The Inflation Reduction Act is a plan proposed by democrats to decrease health care and living costs. GOP lawmakers believe that the democrats caused inflation with the payments of stimulus checks and government handouts. The way that the Fed counteracts inflation is by hiking interest rates. However, this attempted solution to inflation could end up backfiring and causing an economic crisis. 

    Gross domestic product fell by 0.2 percent in the second quarter, after a 0.4 percent decline in the first, fueling fears that a recession may have already begun. GDP includes: consumer spending, home construction, inventories, business construction, federal government spending, and final sales to domestic purchasers. The data released on the GDP decrease shows that the economy is not recovering and that a recession could be soon. Some see the decrease as simply a balancing out of the historic economic growth last year. On the other hand, some think that we are already in a recession. 

    Another figure to illustrate our failing economy is the massive trade deficit that we are enduring. A trade deficit occurs when a country’s imports exceed its exports. The U.S. monthly count of the trade deficit decreased to $87.1 billion in April. Meanwhile, U.S. exports increased by $8.5 billion over March's numbers to $252.6 billion. Imports were down $12.1 billion over March, totaling $339.7 billion. Exports reduce the deficit while imports have the opposite effect. Consumer goods are the main source of the U.S. trade deficit. An ongoing trade deficit is detrimental to the nation’s economy because it is financed with debt. The U.S. can buy more than it makes because it borrows from its trading partners. A trade deficit also causes American businesses to fall behind and jobs to be outsourced to other countries. Unsurprisingly, the U.S. has its greatest trade deficit with China. 

    The U.S. economy has been performing very poorly recently. Not only are we experiencing high inflation, but we are also experiencing a trade deficit. The counteracts to both of these issues are also proving to be ineffective. We have tried hiking interest rates, but that has not helped and might even send us into a recession. We also are in extreme debt due to our continuous trade deficit with countries like China. The 0.2 percent second quarter, and 0.4 percent first quarter drop in the GDP is a good testament to the recent shrinkage in the U.S. economy:








If you would like to learn more, please access these links where I got my information:

washingtonpost.com

nytimes.com

thebalance.com

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