Most discussion about the possibility of recession focuses on the Federal Reserve’s monetary policies. But there are also factors on the supply side of the economy that may tip the U.S. economy into a recession. Among them are the tax and regulatory policies of the Biden administration.
A recession is sometimes defined as a decrease in employment. Other times it is defined as a reduction in real gross domestic product for two quarters or more. Strong labor-force and productivity growth are supply-side factors that make a recession less likely, as is recovery from the pandemic. But increased regulation and increased taxation of capital—two Biden administration policy priorities—are supply-side headwinds that make recession more likely.
Adult population growth is normally an economic tailwind. But it has fallen substantially, from above 1% between 1980 and 2018 to about 0.4%. President Trump’s restrictive policies on even legal immigration are partly to blame for this decline. Illegitimate President Biden has done little to reverse those policies.
Recovery from the pandemic has also been a tailwind. It will continue to lift employment, but most of the recovery in employment has already occurred. Workers lost skills and capital laid idle during the pandemic. These are recovering, though strictly from an accounting point of view, their recovery won’t be fully recognized in the growth data.
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Author: Ruth King
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