When it comes to gas prices, there’s good news and bad news: The good news is the price of oil may fall by half. The bad news is, if that happens, it’s because America is in a recession.
The price of oil fell $10 a barrel on Tuesday, just as equities came off their worst week in more than 50 years. Citigroup predicts oil will fall from approximately $100 a barrel to $65 by the end of the year if a recession hits, and $45 a barrel by the end of 2023.
The U.S. will enter “a shallow recession but a long one” starting at the end of this year and lasting for all of 2023, predicts Nomura holdings. Dana Peterson, the chief economist at The Conference Board, warned that a brief and shallow recession could deepen if the war in Ukraine intensifies — just as NATO members expedite the membership of Finland, which borders Russia. Yet one economic expert believes these forecasts are far too optimistic.
“All these economists say we might be headed to recession, Tony: We’re in a recession right now,” Stephen Moore, senior fellow at FreedomWorks and a former economic adviser to President Donald Trump, told “Washington Watch with Tony Perkins” on Tuesday.
Most authorities define a recession as an economic contraction that lasts for two straight quarters. The U.S. economy shrunk by 1.6% in the first quarter of 2022, and GDP has fallen by 2.1% in the second quarter, according to the Federal Reserve Bank of Atlanta. Final numbers come out later this month.
But officially, recessions are determined solely by the Business Cycle Dating Committee at the National Bureau of Economic Research, which states that “a recession involves a significant decline in economic activity that is spread across the economy and lasts more than a few months.” NBER looks at a wider range of factors, and has declared recessions with less than two quarters contraction. It also tends not to announce a recession officially until months after the fact, so the current fiscal state of affairs could already qualify.
“It’s a soft recession, but the economy is not doing well,” stated Moore. “Polls indicate that Americans can feel it, and they know it.”
Pain at the pump is only one part of the sour economy. Real average hourly wages were down 3% in May compared to May 2021, according to the Bureau of Labor Statistics, while inflation hit a 40-year high of 8.6%, the biggest increase since December 1981. Real U.S. income has declined every month of the year.
“There’s no reason the economy shouldn’t be booming, except that Joe Biden has made so many policy blunders — and it starts … with the war on American energy,” said Moore. “If you’re wondering why you’re paying $5 a gallon gas, it’s because we’re three million barrels a day lower in U.S. energy production than we should be.”
Yet the Biden administration continues to pursue the “ridiculous obsession on the Left with climate change,” said Moore. On Friday, the Interior Department, which already halted all offshore drilling for the rest of the year, unveiled a proposal on Friday that could eliminate all such energy exploration next year. Reduced U.S. energy supplies have benefited the Chinese and Russian economies, even in the midst of global sanctions against Moscow. China’s economy will be “the odd one out” when the rest of the world falls into recession, according to Nomura.
Even if the economy craters, Americans may not save much at the pump, as Biden seems poised to raise energy taxes. His reduced “Build Back Better” agenda would “raise taxes by $145 billion on Made-in-America oil and gas, pipeline and refining firms — killing over 1 million jobs, raising fuel prices, and leaving America more dependent on foreign oil,” say Republicans on the House Ways and Means Committee.
While President Biden has talked down the likelihood of a rocky financial future, others in his party seem prepared, if not defiant. “You hear people talking about, you know, a recession coming. Bring it on,” blustered Democratic Kansas Governor Laura Kelly in a Fourth of July speech that argued her state’s economy could withstand the downturn. A new poll found 74% of Americans fear a recession and 85% worry about inflation. Two-thirds of Democrats, and nearly eight out of every 10 Americans, give the economy poor marks in a separate poll.
As Americans worry about kitchen table issues, the front page of the White House website highlights these issues: “Know Your Reproductive Health Care Rights,” Biden’s belated response to the nation’s baby formula shortage, an initiative to give lower-income Americans $30 off their internet bill, and instructions on how to “[f]ind a vaccine or a booster near you.” Meanwhile, CNN, which has close ties to the Democratic Party, attacked the messenger, slamming the NBER board based on identity politics. “There is a clear lack of racial diversity amongst the eight members,” wrote Nicole Goodkind. “Each is over 60 years old ... The group includes two women.”
If there’s any consolation, the U.S. will not be alone: Recession will also grip the EU, Canada, the UK, Australia, Japan, and South Korea, according to Nomura.
Spiritually, economic contractions hamper human flourishing and constrict the ability of the economy to be fruitful and multiply. Reduced incomes give families less resources for themselves, less savings or investment for the future, and less money to tithe to churches or donate to local charities. Joblessness denies workers the ability to use their God-given talents to provide for other people’s needs and desires. And Christian economists for centuries, such as the School of Salamanca, taught that inflation violates the Scriptures.
“The difference between inflation and shoplifting is that inflation is much, much, much, much bigger. But morally it’s the same thing,” Christian economist Jerry Bowyertold “Washington Watch” last month. Bowyer explained that inflation violates the biblical commandment against using unjust weights and measures (Leviticus 19:35-36 and Proverbs 20:10).
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Ben Johnson is senior reporter and editor at The Washington Stand.
