The economy grew by the largest amount ever — but still falls short of pre-pandemic levels.
Donald Trump on Thursday bragged about an announcement that the economy grew by the largest amount ever in the third quarter — a statistic that sounds promising on its face but fails to mention that the economy remains in a deep hole and has failed to fully rebound from the coronavirus crisis.
"GDP number just announced. Biggest and Best in the History of our Country, and not even close. Next year will be FANTASTIC!!!" Trump tweeted. "However, Sleepy Joe Biden and his proposed record setting tax increase, would kill it all. So glad this great GDP number came out before November 3rd."
According to a report from the Bureau of Economic Analysis, the economy increased at an annual rate of 33.1% in the third quarter. However, that growth followed a second-quarter decrease of 31.4% and a 5% drop in the first quarter — meaning the gains still leave the economy roughly 3.5% smaller than it was at the start of 2020.
That 3.5% is nearly the same amount the economy shrank over a year and a half during the 2008 financial crisis.
"The economy is -3.5% smaller than it was in late 2019. Is that a big hole? Well, that's roughly as large as the hole the economy fell into during the financial crisis, and at the time we thought that a damn big hole," Justin Wolfers, an economics professor at the University of Michigan, tweeted on Thursday.
Meanwhile, despite the fact that the economy is rebounding some from coronavirus fueled recession, 12 million Americans are still out of work, and 8 million people have fallen into poverty since the pandemic started.
Last week, 751,000 people filed claims for Unemployment Insurance — which according to Wolfers is bigger than "any week in the Great Recession (or any prior recession)."
Still, Senate Republicans and the Trump administration have refused to pass more aid for struggling workers and state and local governments, which may be forced to cut services and jobs due to revenue shortfalls stemming from the recession.
House Democrats passed multiple bills this year that would have extended a $600 weekly Unemployment Insurance boost to out-of-work Americans, authorized another round of direct payments to those earning under a certain income threshold, and would have provided funding for state and local governments.
But Republicans refused to pass those bills.
Instead, Senate Majority Leader Mitch McConnell prioritized confirming Justice Amy Coney Barrett to the Supreme Court, days before an election in which more than 78 million people have already voted, according to the U.S. Elections Project.
What's more, despite the economic rebound, economists warn that the current surge in coronavirus cases, coupled with the lack of coronavirus aid from Congress, could slow the economic recovery.
"When you stop debating what a 33.1% number means, there is an important reveal in the GDP report: States are hurting and their contraction is a drag on the economy," Betsey Stevenson, the former chief economist at the Department of Labor under former President Barack Obama, tweeted.
"States need federal money now."
Published with permission of The American Independent Foundation.