Wolfers analyzes the state of the US economy amid the banking crisis

May 11, 2023

Amid encouraging economic indicators, bank failures, and an impending debt limit crisis, Ford School economics professor Justin Wolfers has been commenting across the media.

The debt limit debate taking place in Congress and in negotiation with the White House is a real worry. Speaking to CNN, he explained that unlike bank regulators, Wolfers does not have similar confidence in that nation's politicians to maintain a stable financial system. "There’s a great fear that this generation of legislators are more irresponsible, more polarized and more willing to do damage than any previous generation," Wolfers stated. "I will tell you that I am more worried than I’ve ever been in my career, at this moment, about the sky actually falling."

"Sometimes, it is worth taking a really big risk if you get something back. But eventually, we're going to repay our debts, there's no question we will. So why we would risk destroying our financial system along the way to get to the exact same outcome? That's all downside and no upside. This is the dumbest financial choice you could imagine," he told The Detroit News

Wolfers spoke to PBS News Hour about the positive outlook of the U.S. economy based on the latest GDP report. "GDP is back where the CBO thought it would be four years ago.," Wolfers highlighted. "Unemployment is nearly at a 50-year low. Wages are growing."

He also commented on how these figures are in stark contrast to the negative rhetoric that has been occurring about the economy. "This has been an economy dominated by people talking about recession and doom-and-glooming their way forward," Wolfers noted. "But every time you look at the actual numbers, people are spending, people are producing, the economy keeps growing."

Despite the positive state of the U.S. economy, there are real concerns growing amid the banking crisis taking place characterized by significant bank failures. On CNN, Wolfers discussed the reasons for the collapse of one of the banks in the spotlight, First Republic Bank. "These are banks that aren't covered by our usual deposit insurance," Wolfers said. "That means that if people get a little bit nervous, they start to pull money out and that means that they can be caught without enough cash in the vault."

Speaking to MSNBC, Wolfers emphasized that the "rest of the [banking] sector is in very good shape" given how these bank failures demonstrate a "set of vulnerabilities" that no other American banks have.

And a piece of research Wolfers compiled in 2015, noting that the number of S&P 500 CEOs named John outnumbered women, has finally been laid to rest, as Bloomberg reported that women CEOs finally have reversed the trend. 

What a default on the national debt could mean for Michigan, The Detroit News, May 8, 2023

It’s time to worry about a US default. For real this time, CNN, May 1, 2023

What the third banking default of the year means for your wallet, MSNBC, May 1, 2023

CNN looks at what comes next for First Republic Bank, CNN, April 30, 2023

What the latest GDP report says about the strength of the U.S. economy, PBS News Hour, April 27, 2023

At the CEO level, women finally outnumber men named John, Axios, April 27, 2023