An article from the Washington Times has revealed that the US is already in a full-blown economic crisis, with an unemployment rate of 4.7% and a consumer debt burden of $1.3 trillion.
In fact, as the US enters a third year of a recession, and as inflation accelerates, the country is heading into a “lost decade” that could see the country’s GDP decline by 20% by 2025, according to the Economic Policy Institute (EPI).
“What’s happening to us is, the US economy is going through a lost decade,” said Robert Lighthizer, senior fellow at the Institute for Policy Studies.
“We’re going into a third recession.”
In a sign of the economic turmoil, the Fed announced last week that it will hold its first rate hike in almost two years on Thursday.
This week’s data from the Federal Reserve Bank of New York (FRBNY) suggests the economic crisis is being felt in every part of the country, and the effects are felt in many areas.
The US economy grew at an annualized rate of 2.3% in the first quarter, according the Bureau of Economic Analysis (BEA).
But the economic impact of the recession is still felt in the US, with the unemployment rate at 5.1% and the debt burden hitting $1,321 trillion, according data from Bankrate.com.
“I think it’s very important for people to understand that, at this point, we’re in a lost decades,” Lighthiser told the BBC.
“We’re in the middle of a period of extreme unemployment, we’ve lost the manufacturing base and the jobs have dried up.”
Lighthizer said that the economic meltdown will “dampen the enthusiasm of Americans for the next wave of populist, populist politics”.
“If we’re not careful, that wave will have a much bigger impact than any one election,” he said.
The economic crisis was not the only factor driving the US into a recession.
The Federal Reserve raised interest rates in June to a record high of 0.25% – the first time since 2008 that the Fed has raised rates in excess of the economy’s rate of growth.
But the Fed’s decision to hike rates so aggressively was controversial, and sparked an outcry in Congress.
On Wednesday, House Speaker John Boehner (R-OH) said the Fed should be ashamed for raising rates, saying it “undermined” the confidence of investors in the financial system.
“The Fed has to understand its role as a regulator and an investment bank, and not as a lender of last resort,” Boehner said.
“If you don’t like it, raise rates.”
But in an interview with the Wall Street Journal on Thursday, Fed Chair Janet Yellen said she “couldn’t imagine” raising rates when the economy was “in a full throated recession”.
Yellen told the newspaper that the Federal Open Market Committee (FOMC) was already discussing how it would manage the economy in a “full-blown recession”.
“The FOMC is currently considering the future path of the US dollar and other measures to support the U.S. economy,” she said.
“One of those options is for the Federal Funds rate to increase as part of an appropriate rate increase, but we will consider that in the context of a fullblown recession.”
Yellen said it was important for policymakers to keep the Fed on the safe side, “given that we have to manage a potential recession”, according to Reuters.
A report by the Congressional Budget Office (CBO) published last week found that the recession could be permanent.
According to the CBO, there will be a “loss of employment, and job loss and unemployment will persist”.
The CBO also said that a “sharp reduction in wages and benefits will lead to further economic losses”.
The CBO said the US could lose its AAA credit rating, as well as a reduction in its GDP growth rate, if it continued with its current policies.
“The US will face a prolonged period of low inflation,” the report said.
The Congressional Budget office has also warned that a recession could trigger “further economic hardship, including a prolonged recession”.
“In addition, there could be additional harm to economic activity due to an extended slowdown in the economy, and a reduction or erosion of the purchasing power of the standard of living,” it added.
The Federal Reserve is scheduled to meet on Thursday to discuss the economy and the unemployment figures.
US President Donald Trump has repeatedly said he will raise interest rates, but has yet to announce whether he will do so before the November election.
On Thursday, he told the Wall St Journal that he had not decided whether he would raise rates, despite recent polls that showed he could lose the election.
“Right now I’m not sure,” he told WSJ.
“I’m still looking at the data, I’m still assessing what it’s telling me.
And it’s not an easy decision.”