If we don’t learn from history, we are doomed to repeat it. This includes honestly assessing the economy in 2023 to better inform decisions in 2024.
The first thing many people are concerned about is the affordability of housing.
The year started with a spike in the average interest rate on a 30-year fixed mortgage. 6.5% In January it was close to 8%, in October it was close to 8%, but recently Approximately 6.6%. These high mortgage interest rates and Housing prices are at an all-time high contributed to unaffordable housing market.
Existing home sales increased by 0.8% in November; 7.3% decrease compared to last yearindicating that the family housing market is struggling and is unlikely to improve significantly in 2024.
Another concern is the cost inflation.
Rampant soaring prices for a typical basket of goods and services means a reduction in our purchasing power. This contributes to reducing or worsening the comfort of housing, food, education, and other basket costs for many families.
As of November 2023, the growth in core consumer spending was 3.2% compared to the previous year. The price index for goods and services included in this basket does not include food and energy, which is what the Federal Reserve focuses on. Core PCE inflation has slowed from nearly 6% in 2022, but recent inflation remains at 3.2%. 60% That’s above the Fed’s average inflation target of 2%.
While easing inflation has provided some relief for many Americans, the problem is that average weekly income adjusted for core inflation declined in 2019. 23 of the last 35 months From January 2021 onwards. In total, these real average weekly earnings are: 0.8% decrease It has since shown why inflation is a problem. biggest concern.
A further problem is debt.
Because profits haven’t kept up with inflation, credit card debt That amount has soared to more than $1 trillion as people struggle to make ends meet, which bodes badly for 2024. And many people are rapidly depleting their savings and retirement funds.
What about work?
recent white house celebrated “Total job gains achieved under the Biden administration reached 14.1 million by November 2023.” However, 9.4 million of those jobs were recovered from jobs lost during the pandemic lockdown. This metric becomes less impressive when you consider that there are only a few That means 4.7 million new jobs have been added since January 2021, which equates to 134,000 jobs per month. This is positive, but not record-breaking.
The labor market downturn in recent months suggests that 2024 could be a tough year for many workers.
This year, most people’s pockets have decreased rather than increased, and the job market has lagged as well. But what about overall national growth? Isn’t GDP soaring? Not exactly.
Real GDP growth in Q3 2023 looks solid at 4.9% annualized.But if you Dig into the details It’s more complicated.
Government spending, which is a drag on the economy because it has to collect taxes from the private sector and distort market activity, fell by 0.99 percentage points. In addition, private inventories decreased by 1.27 percentage points, affected by fluctuating interest rate expectations. If we exclude these contributions to account for stable real private GDP, the increase is only 2.6%.
This slower pace didn’t suddenly appear out of nowhere. This has been the case since early 2022, when he suffered two quarters of decline in real terms. GDP, is waving a big red flag about the recession. And if you take into account that precious metric, real gross domestic product, which is average or real gross domestic product and real gross domestic income, the economy has declined in three of the past seven quarters.
These economic problems suggest stagflation caused by misguided pandemic lockdowns and subsequent deficit spending with trillions of dollars of new money printing, but there may be some relief.
The Fed has slowly rebalanced its assets, which peaked at $9 trillion, $7.7 trillion But major economic challenges lie ahead, as Congress continues to run spending deficits of about $2 trillion a year and net interest payments have soared to $1 trillion a year.
These deficits will make it more difficult for the Fed to properly normalize assets quickly and return them to at least the $4 trillion they were before the pandemic. Because budget deficits contribute to higher interest rates, the Federal Reserve is likely to ramp up debt monetization to help Congress avoid necessary spending restraints.
While these truths are difficult to accept, many notable rays of hope have also emerged throughout the year.
In 2023, a significant shift occurred with a transformative surge in educational choices.
20 States expand school choice and achieve record performance Ten Each state has passed some form of universal school choice, making 36% of American students eligible for private choice programs.
Although some states have been slow to expand educational freedom, the overall impact of this revolution has been historic. Recognizing that children are the foundation of our nation’s future, recognizing that improved education is a critical predictor of child success, and ensuring that the catalyst for change is rooted in more universal school choice; There is no doubt that there are.
The second bright light is the flat state tax revolution.
Many states have taken bold steps to strengthen their economic situation. especially, prominent states Places like California and New York face an ongoing population exodus as individuals seek refuge from progressive policies. A less-advertised state He embraced free market principles and brought them to the national stage. The more conservative states of Florida and Texas continue to lead in where people will move in 2023.
The third thing to support is responsible exercise towards sustainable national budget revolution.
Some states have improved spending limits to cover more of the budget, limit budget growth to no more than population growth and inflation, and require a supermajority vote to break the limit or raise taxes. We are moving in the direction of doing so.
The synergy of these reforms demonstrates the power of federalism as states experiment with policies, uncover effective strategies, and foster healthy competitive laboratories. We need federal, state, and local politicians to know what works and do it.
Our trajectory beyond 2024 depends on whether we embrace free market capitalism as the best path to making people prosperous. This includes cutting government spending, printing less money, expanding school choice, and extending tax cuts. In short, there will be less government.
By doing so, we can welcome a more prosperous year in 2024. Happy New Year.
Dr. Vance Zinnis president of Ginn Economic Consulting, host of the Let People Prosper Show, and previously served as deputy director for economic policy in the White House Office of Management and Budget from 2019 to 2020. Follow him on X.com. @VanceGinn.