Prepare for a short-lived economic boom

The Bureau of Economic Analysis will release its estimate of economic growth for the third quarter on Thursday, and expectations are stratospheric. The Atlanta Federal Reserve suggests that gross domestic product may have grown at an annual rate of more than 5%. Given continued expectations of a slowdown, how is this possible? The answer lies in the unexpected easing of fiscal and monetary policy in 2023.

The financial story is simple. After factoring in the Biden administration’s failed attempt to forgive student loans, the deficit unexpectedly doubled this year to about $2 trillion, according to the Congressional Budget Office. A deficit above 7% of GDP can boost growth, but short of war or a severe recession, this is irresponsible fiscal management, for which we pay the price with lower interest rates. students.