Revised estimates released by the Bureau of Economic Analysis show that the U.S. economy grew at a robust pace in the fourth quarter. However, economist Peter Schiff remains skeptical about the quality of this growth.
What Happened: According to Schiff, citing data from the BEA, annualized nominal GDP rose by $334 billion year-over-year in the fourth quarter. Despite this apparent growth, Schiff pointed out that the national debt increased by over $834 billion during the same period, more than double the GDP growth.
Schiff emphasized that this debt doesn’t even include changes in consumer credit levels during the same period.
“This isn’t economic growth. It’s a credit bubble,” he said.
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Why It Matters: Proponents of Bidenomics argue that the current administration’s policies have helped the economy recover from the COVID-19-induced downturn in 2020. Real GDP growth accelerated to 5.8% in 2021 after contracting by 2.2% in 2020, largely due to COVID-19 stimulus measures. However, growth moderated to 1.9% before picking up to 2.5% in 2023, amid rising interest rates and inflation.
As Schiff highlighted, the national debt has been increasing rapidly, driven by unsustainable spending. The interest on the debt is now estimated to exceed spending on military or other major items, except Social Security or the Department of Health and Human Services.
Despite resilient consumer spending, which drives about two-thirds of economic activity, U.S. consumers have been living beyond their means. Outstanding U.S. consumer credit stood at $5.01 trillion in December, with revolving credit tied to credit cards climbing to $1.31 trillion.
While some analysts, such as Ark Invest founder Cathie Wood, are optimistic about continued accelerated growth due to technological innovation, others, like Schiff, remain cautious about the sustainability of the current economic trajectory.
The SPDR S&P 500 ETF Trust SPY, an exchange-traded fund that tracks the performance of the broader S&P 500 Index, ended Wednesday’s session down 0.10% to $505.76, according to Benzinga Pro data.
Read Next: ‘Unsustainable,’ Says Elon Musk As Interest Burden From Ballooning Debt Surpasses Defense Spending
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