Economic Boom

The biggest story of 2023 is the U.S. economy grew faster than any other economy in the Group of 7 nations, made up of democratic countries with the world’s largest advanced economies. By a lot. The economy grew 3.1 percent from the end of 2022 to the end of 2023, defying expectations, including robust growth at the end of the year. The inflation rate is falling toward historically normal levels. U.S. stock markets are recording record highs.

The International Monetary Fund reported that the U.S. gross domestic product grew by 2.5%, significantly higher than the GDP of the next country on the list: Japan, at 1.9%.

IMF economists predict U.S. growth next year of 2.1%, again, higher than all the other G7 countries. The Federal Reserve Bank of Atlanta projects growth of 4.2% in the first quarter of 2024.

The Labor Department said employers added 353,000 jobs in January, the highest monthly number in a year. It also revised its estimate of December job growth upward by more than 100,000 jobs — to 333,000 — suggesting that the job market was accelerating even with unemployment near half-century lows.

The idea that using the government to support ordinary Americans—those on the “demand” side of the economy—would nurture strong economic growth shows credibility.  Republicans have insisted since the 1980s that the way to expand the economy is the opposite: to invest in the “supply side,” investors who use their capital to build businesses.

Even inflation, which ran high, appears to have been driven by supply chain issues, as the administration said, and by “greedflation,” in which corporations raised prices far beyond cost increases, padding payouts for their shareholders.

The demonstration that the Democrats’ policies work has put Republicans in an awkward spot. Projects funded by the Infrastructure Investment and Jobs Act, also known as the Bipartisan Infrastructure Law, are so popular that Republicans are claiming credit for new projects or, as Representative Maria Elvira Salazar (R-FL) did on Sunday, claiming they don’t remember how they voted on the infrastructure measure and other popular bills like the CHIPS and Science Act (she voted no). When the infrastructure measure passed in 2021, only 13 House Republicans supported it.

Republicans recognize that the Democrats’ economic policies are popular. The House passed bipartisan tax legislation that expanded the Child Tax Credit, which had expired after Senate Republicans refused to extend it. Democrats provided most of the yea votes—188 to 169—and Republicans most of the nays—47 to 23—but, together with a tax cut for businesses in the bill, the measure was a rare bipartisan victory. If it passes the Senate, it is expected to lift at least half a million children out of poverty and help about 5 million more.