Ford School economics professor Justin Wolfers has been saying that a recession does not seem likely, given continuing strong employment numbers. The threat of a default, on the other hand, could have been disastrous. Here are some excerpts of his media appearances in May:
The debt limit deal would reduce government spending by about $1.5 trillion, Marketplace, May 31, 2023
The thing is, there is a lot of government spending that the debt ceiling deal does not cut. It focuses on capping discretionary spending — money the government uses to fund different agencies and programs. And “discretionary spending is one-third of all government spending,” said Justin Wolfers, an economics professor at the University of Michigan. “And half of that is military spending, which Republicans didn’t want to touch.”
This week, JPMorgan and Goldman Sachs estimated that the deal would shave off just about a tenth to two-tenths of a percentage point from overall gross domestic product.
“It does slow the economy, but not in a particularly meaningful way,” Wolfers said. To be clear, Wolfers added that that’s not a bad thing.
Biden & McCarthy scramble to sell debt deal to hard-liners, CNN, May 30, 2023
“This is really good news. And it’s a kind of funny good news. It’s the absence of catastrophic bad news. Markets had expected that they would get to this point all along. And so in many respects, when you get what you expect, markets don’t move a lot. A lot of people are putting disaster scenarios away for a couple of years.”
So would a U.S. default really be that bad? Yes – And here's why, NPR, May 24, 2023
A default may earn the U.S. a black eye in terms of its reputation, that thinking goes, but it could be the kick in the duff that the U.S. government needs to actually get spending under control.
"That's a totally reasonable view," says Justin Wolfers, professor of economics and public policy at the University of Michigan. "Just like your family has to live within a budget, you might say you want Congress to live within a budget."
But Wolfers is clear that's not quite how it would play out. "Defaulting on the debt does not reduce our spending," he says. "It just means we stiff our creditors."
Are there recession proof jobs? These occupations tend to be least impacted, USA Today, May 23, 2023
“There are sectors that, on average, have not lost jobs typically during recessions,” Justin Wolfers, a professor of public policy and economics at the University of Michigan told USA Today.
Higher education is countercyclical, according to Wolfers, meaning that it tends to do better when other sectors are struggling as high school graduates who are unable to find work may be more drawn to the idea of college.
“So, we actually tend to see enrollment rise during bad times,” he said.
However, Wolfers cautioned that the impacts may not be the same the next time around. “The difficulty is, what's been true on average in the past may not be true in the next recession,” he said.
Economy Still Weird, The Dispatch, May 8, 2023
