Rick Haglund: Republicans claim we’re in a recession, but most economists say otherwise

August 8, 2022 3:17 am

A sign advertising jobs at a Traverse City McDonald’s | Susan J. Demas

Now that the candidates for November’s general election are set, you’re going to be hearing the dreaded R-word, as in recession, even more than in the past few months.

Are we heading for one? Are we already in one? And what the heck is a recession, anyway?

Republican candidates trying to unseat Democratic incumbents will throw the word around with abandon, attempting to make voters forget about their highly unpopular, restrictive views on abortion.

That strategy may have been turbocharged by a stunning outcome in the Aug. 2 primary in conservative Kansas, where voters overwhelmingly voted to keep abortion rights in their state constitution.

Republican gubernatorial candidate Tudor Dixon attends a Republican gubernatorial in Howell on May 13, 2022. (Andrew Roth | Michigan Advance)

Tudor Dixon, the GOP nominee for Michigan governor, avoided any mention of abortion in a lengthy victory speech that was mostly about economic issues.

She said her campaign is “about the young family in Sterling Heights who can’t afford their groceries anymore because of [Democratic Gov.] Gretchen Whitmer and Joe Biden’s inflation.” She also claimed that President Biden has “pushed us into a recession. Hear that word?”

Democrats will try to knock down any such talk, while focusing on Republican candidates’ opposition to abortion. 

A Democratic-backed group is already out with a scathing ad featuring an interview in which Dixon says a 14-year-old raped by an uncle should not be allowed to have an abortion. 

Polls have shown that a majority of Michigan voters favor keeping abortion legal in most instances. A statewide poll last month for the Detroit News and WDIV-TV found that about 58% of voters statewide disapproved of the Supreme Court’s overturning of Roe v. Wade, the landmark 1973 ruling that legalized abortion.

With the prospect of Michigan voters, especially women, showing up at the polls in droves to defeat anti-abortion candidates, Dixon’s best chance of defeating Gov. Whitmer might be to hammer her on pocketbook issues.

Michigan residents are clearly worried about the impact of rising prices for food, gasoline and shelter on their paychecks. In a statewide poll conducted in May for the Detroit Regional Chamber, 73% of voters said the economy was on the wrong track.

Dixon and other Republicans contend the U.S. economy already is in recession, citing the shorthand definition of two consecutive quarterly declines in Gross Domestic Product.

The Biden administration has pushed back, citing low unemployment and strong consumer spending. Biden boldly proclaimed last month that the country is “not going to be in a recession.”

Most economists agree, so far. And an impressive new jobs report bolsters Biden’s optimism. The Labor Department reported Friday that U.S. employers added 528,000 jobs in July, far exceeding analysts’ expectations.

I’m more optimistic about Michigan than the U.S. (economy).

– University of Michigan economist Don Grimes

Recessions are officially determined by a wonky group of economists called the National Bureau of Economic Research, which says the economy is still expanding. 

The bureau says a recession occurs when there is a “significant decline in economic activity that is spread across the economy and lasts more than a few months.”  That activity includes employment, personal income, industrial output, retail sales and consumer spending.

But inflation, which is taking a big bite out of paychecks, has many consumers feeling like we’re in a recession, despite what economists say.

Real disposable income per capita — what’s left over after paying taxes — has fallen a steep 5.7% this year, according to University of Michigan economist Don Grimes. That’s mainly a result of the end of COVID stimulus programs that injected $2 trillion into the economy.

He expects real incomes to continue sliding this year as consumers exhaust stimulus cash in their bank accounts built up since the start of the COVID pandemic. 

“I think that explains why people are so unhappy,” Grimes told me. “It’s been a tough year.” 

Low-income families are suffering the most from the worst inflation in 40 years. But seniors who have seen pensions and other fixed retirement income eaten away by rising prices also are struggling.

“Retirees are taking a huge hit,” Grimes said.

Nearly 20% of Michigan’s population is 65 years and older, and a high percentage of seniors vote. It should come as no surprise that Whitmer wants to eliminate the state income tax on pensions and other retirement income. The governor said her plan would save 500,000 households an average $1,000 each.

Gov. Gretchen Whitmer, Jan. 27, 2022 | Whitmer office photo

Recessions, or the feeling by a large share of the electorate that the economy is heading for one, can be bad news for incumbent politicians facing reelection. But not always.

Democratic Gov. Jennifer Granholm handily defeated her Republican challenger, Amway scion Dick DeVos, in 2006, even though Michigan had lost jobs for three straight years under Granholm’s watch. The DeVos family, by the way, is a major financial backer of Dixon’s campaign.

The latest U of M forecast predicts continued state job growth through 2024, but at a much slower pace than in the first three months of the year.

Grimes said Michigan could outperform the nation in a slowing economy because there’s so much pent-up demand for new cars and trucks, which have been in tight supply during the COVID pandemic. As supply chain problems begin to ease, allowing vehicle production to increase, sales could take off.

“I’m more optimistic about Michigan than the U.S.,” Grimes said.

That will make it much harder for Dixon to convince voters they need a strict anti-abortion governor leading the state.

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Rick Haglund
Rick Haglund

Rick Haglund writes the "Micheconomy" column for the Michigan Advance. He's a former reporter and business columnist for Booth Newspapers, now the MLive Media Group, with extensive experience covering Michigan’s economy and the auto industry. He now works as a freelance writer based in Southeast Michigan.