Continued high levels of government spending under the Biden administration have supported U.S. economic growth in the second quarter of 2023, economists told the Daily Caller News Foundation.

Real gross domestic product (GDP) grew 2.8% in the second quarter of 2024, well above the 2.1% growth economists had expected. according to According to the Bureau of Economic Analysis (BEA), most of the growth recorded during the quarter was attributable to government spending, both directly through increased government spending and indirectly through growth in sectors that benefit significantly from taxpayer dollars. (Related: Smoke and mirrors: New York City's “jobs boom” was actually a taxpayer-funded waste)

“Government spending has played a big role in much of the economic growth over the past few years,” Peter Earl, senior economist at the American Institute for Economic Research, told DCNF. “The problem, of course, is that government spending is redistributive – taxing certain people and/or incurring trillions of dollars of debt and then sending that money to other people. It's not innovative entrepreneurship or other productive commercial activity.”

Government consumption grew 3.1% in the second quarter of 2024, up from 1.8% in the previous quarter, accounting for about 19% of overall quarterly growth, according to the BEA.

“This year, we're borrowing $1.8 trillion to get 2.8% growth this quarter, compared to 1.4% last quarter. So by spending almost $2 trillion, we're getting roughly 2.1% growth,” Michael Falkender, chief economist at the America First Institute, told DCNF. “How can we not get 2% GDP growth if we're borrowing $2 trillion? This is not an achievement… it's not a reflection of sustainable economic policies.”

“The reality is that the federal budget is going to be very different from the current budget,” EJ Antoni, a research fellow at the Heritage Foundation's Grover M. Herman Federal Budget Center, told DCNF.Consumer spending grew 2.3% in the second quarter, up from 1.5% in the previous quarter, thanks in large part to government spending..

“Government transfers are not all government spending. When the government takes money from one person and gives it to another in the form of welfare, that counts as consumer spending,” Antoni told DCNF. “Currently, about $4.2 trillion of annual consumer spending is government transfers, which shows that total government spending is much larger than the GDP report indicates.”

According to the BEA, consumer spending in the second quarter reached an annualized $19.38 trillion, meaning that more than one-fifth of personal consumption expenditures came from government transfers.

The U.S. national debt was approximately $35 trillion as of July 29, an increase of approximately $7.3 trillion since Biden took office on January 20, 2021. according to To the Ministry of Finance.

“What was the big contributor to the GDP number? The big increase in health care spending coincides with all the jobs that we've seen in the health care sector, many of which are paid for by the government,” Folkender told DCNF. “Transportation investments are being funded, but this is deficit financed. [Inflation Reduction Act] money [and] Government spending has increased.”

Healthcare spending accounted for about 16% of GDP growth in the second quarter., According to the BEA, by 2022, government spending will account for just over 45% of health care spending. according to To the Congressional Research Service.

The health care industry has been driving recent job gains in the United States, accounting for 49,000 of the 206,000 nonfarm payrolls added in June and about 29% of all jobs added over the past 12 months. according to To Federal Reserve Bank of St. Louis (FRED).

I'm beginning to think that this “economic growth” is actually nothing more than a debt bomb. pic.twitter.com/h3cEnn9HYc

— Dr. EJ Antoni (@RealEJAntoni) July 25, 2024

The GDP figure benefited from sustained consumer spending, even as the personal savings rate fell from 3.8% in the first quarter of 2024 to 3.4% in the second quarter, a far cry from its peak of 32% during the COVID-19 pandemic. according to To Fred.

Credit card delinquencies also hit an all-time high in the second quarter: As of the end of March, 2.59% of credit card balances were 60 days or more past due, more than double the low recorded during the COVID-19 pandemic.

“It's quite surprising that American consumers continue to spend even as savings rates plummet, unemployment rates start to rise, and 30- or 90-day payment delinquencies on some types of consumer loans increase,” Earle told DCNF. “We don't know where it's coming from. — Maybe it's mortgages, deferred payment plans, or maybe the data we're using doesn't accurately capture consumers' spending habits. — But either way, it's surprising it's lasted this long, and the runway must be running out. Inflation is still nearly double what it was four or five years ago, interest rates are much higher, and savings from the pandemic stimulus have evaporated.”

Earl and Antoni are also skeptical of the BEA's top-line GDP figure, expecting it to be revised downward in future estimates due to statistical issues, more complete data and possible weakness in manufacturing.

“Revisions are standard procedure, but they balance out over the long term – in other words, some go up, some go down, and average out to zero over time,” Antoni told DCNF. “This is not something we've seen recently, and it's clear that in a post-pandemic world, statistical issues are emerging that are causing problems for economic indicators.”

“We know that the unprecedented economic circumstances and data collection challenges during the COVID-19 pandemic have caused significant volatility in GDP revisions,” Earle told DCNF. [the unemployment rate for people without jobs who have looked for work in the past four weeks]”With both initial and continuing jobless claims trending upwards and the regional Fed manufacturing index weak, we believe the second and third rounds of GDP in Q2 2024 will be lower, but we cannot predict by how much.”

First-quarter growth rates were revised downward. 1.4% from initial Growth rate for the fourth quarter of 2023 has been revised upward from the initial forecast of 1.6%. 3.3% To 3.4%According to BEA data.

“All or nearly all of the apparent growth in the economy is simply bringing future growth forward to today at the expense of future growth,” Antoni told DCNF. “It's like consumers getting into massive credit card debt to raise their standard of living today, only to find themselves drowning in debt payments tomorrow.”

The White House did not respond to a request for comment from the DCNF.

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