For 2nd year in a row, economist predicts recession at Lakeland Economic Forecast event

The U.S. economy is headed toward a recession in 2024 according to conservative economist Brian Wesbury, who spoke Thursday at the RP Funding Center in Lakeland.

“I do think we are going to have a recession,” Wesbury said at the 2024 Economic Forecast Breakfast sponsored by the Lakeland Chamber of Commerce and Allen & Company. “I don’t know how we are going to avoid one.”

The crowd of Polk County business people heard government spending during the COVID-era shutdowns as one of several factors leading to a possible economic slowdown, which Wesbury also predicted at the beginning of 2023.

He shared his thoughts and opinions and often backed them with data that he displayed on line graphs and charts. His first chart showed U.S. consumption over time with a huge spike in buying during the COVID lockdown. While the metric is not the most important data on the economy, it shows what happened at that time.

He said service workers such as bartenders and hotel staff were sent home and could not work.

“What we started to do is we paid those people to sit at home,” he said. “And if you are getting paid and you’re not working and you’re sitting at home and you can’t go to the bar because it is closed, what do you do? You buy stuff. You buy goods.”

Americans spent $1.5 trillion more on goods than consumers otherwise would have spent if the COVID lockdown had not happened, he said. His “poster child” for this anomaly was Peloton, an interactive stationary bicycle company, which had a share price of $160 during the lockdown. Today, its stock is $5 because people returned to their local gym post-lockdown.

“All of this spending was artificial,” Wesbury said. He compared the government spending to pump up the economy to a dose of “morphine;” it took the pain away from business owners and everyday people who lost jobs and businesses during the lockdowns.

He also noted that tax revenues for the federal government soared during the lockdown even though six million people were out of work. Wesbury said this was because most of the spending and consumption was taxable.

He called this another “morphine bubble” because it too was temporary. “Now it is showing up, because federal receipts are down 10%.”

The same was true of profits for companies being kept afloat during COVID by government-funded rescue plans, he said.

“The morphine is going to wear off,” he said. “I don’t think it has yet.”

He empathized with doomsday investors who wanted to store gold in his office. He said with the U.S. government holding $34 trillion in debt and representing 22% of GDP, it is easy to understand why people think the U.S. dollar will lose its place as the world’s reserve currency and the country is about to collapse like the Roman Empire did.

Changed to inactive: Decline in active voter rolls hits Democrats harder than GOP in Polk County and Florida

The federal debt as a share of GDP has more than doubled in 60 years, Wesbury said. In the 1970s, it represented 10% of GDP.

“Every time we’ve had a crisis, ‘08, ‘09 (during the mortgage crisis) and COVID, it just keeps going up and up and up. This is worrisome. I can’t sugar coat it. Because the bigger the government gets, the harder it is to produce wealth.”

The second issue worrying inventors is the money supply or M2, which represents people’s checking, savings accounts and CDs, Wesbury said. The amount of dollars printed by the U.S Treasury rose by 42% since February of 2020 to fund its stimulus programs.

“The reason things haven’t slowed down yet, in my opinion, is because this money is still out there,” Wesbury said.

He said the resulting inflation because of the mushrooming supply of money can be seen by the average person who orders a pizza via Doordash. The receipt may show that the price is higher for pizza, but in reality the value of pizza did not go up, the value of the dollar went down. 

At the same time, the federal government increased its budget deficit from $1 trillion to $2 trillion in 2022 and 2023. He said the lion’s share of government funding for infrastructure went to semiconductor manufacturers unlike "shovel ready" projects in the past. Many of those were not shovel ready, but funding a company like Intel would have an immediate impact.

He called the government spending on COVID rescue programs “unprecedented” and the consumption by consumers and businesses as “artificial” and temporary.

Further, he said he does not believe that government spending ever improves the economy on a permanent basis. Once that money is gone, he expects a recession would occur.

While he remained pessimistic on the economy for 2024, he saw a few bright spots in the technology and pharmaceutical industries.

Wesbury has spoken at the event for 30 years. He is the chief economist for First Trust, a financial services firm in Wheaton, Illinois. He frequently appears on TV network shows, newspapers and magazines and has worked for both the private and public sector employers.

This article originally appeared on The Ledger: Two years running, economist predicts recession at Lakeland breakfast