The Best Economic Growth in 37 Years

By Yuval Rosenberg

Happy Thursday! Justice
Stephen Breyer officially announced his retirement, and President
Joe Biden pledged to nominate a Black woman to take Breyer’s seat
on the Supreme Court, saying he’d announce his pick by the end of
February. Here’s what else is happening.

Economy Grew 5.7% in 2021, Fastest Pace Since 1984

The U.S. economy grew by 1.7% in the fourth quarter of 2021, the
Commerce Department announced Thursday. The quarterly figure
translates to an annualized rate of 6.9%, a better-than-expected
result that boosts confidence that the rebound from the Covid-19
pandemic is continuing at a solid pace.

For the full year, GDP growth totaled 5.7%, the highest since
1984.

The numbers are particularly encouraging given the potentially
negative impact of two different coronavirus waves in the second
half of 2021. Worries about possible supply chain problems seem to
have contributed to the strong growth in the final quarter, as
retailers built up inventories ahead of the holidays in order to
ensure a sufficient supply of goods. Household spending and private
investment also rose significantly.

Taking credit: The White House was quick to highlight the
latest report, saying the strong growth was “no accident” but
rather the product of an economic strategy focused on creating
good-paying jobs, boosting manufacturing and strengthening the
supply chain. “The GDP numbers for my first year show that we are
finally building an American economy for the 21st Century, with the
fastest economic growth in nearly four decades, along with the
greatest year of job growth in American history,” President Joe
Biden said in a statement.

Economists broadly agreed on the strength of the report. “GDP
growth dramatically outpaced forecasts made a year ago,” said
Jason Furman, who chaired the Council of Economic Advisers under
President Obama. “Most forecasters expected the economy to grow 3
to 4 percent this year. Instead it has grown 5.5 percent. That is
more than a percentage point faster than even the most optimistic
forecast was expecting.”

Much of the credit, though, goes to the specific relief and
stimulus efforts made during the pandemic rather than any long-term
economic policy. “Fiscal and monetary policy committed to
supporting the economy aggressively during the pandemic, and it
worked,” Julia Coronado, a former Federal Reserve economist,

told The New York Times. “Not only did we meet the goal
of shortening the recession, we exceeded all expectations” on
getting people back to work.

The inflation puzzle: The surge of inflation over the
last year complicates the story about how the economy is
performing,
says Ben Casselman of the Times. “On the one hand,
the recovery has been remarkably swift by both historical standards
and compared with what forecasters expected when the crisis began,”
Casselman writes. “On the other hand, a surprising surge in
inflation is preventing the economy from rebounding more quickly,
or feeling more normal. And to some extent, the same forces — the
remarkable levels of aid provided by the government, and the
unusual nature of the pandemic recession itself — are responsible
for both trends.”

Casselman notes that in inflation-adjusted terms, the economy is
nearly back to its pre-pandemic trend, just 1% below where it would
have been without Covid-19. But in unadjusted terms, GDP is more
than 1% above where it would have been. “In dollar terms, we are
producing and spending as much as ever,” Casselman says. “But
because of inflation, those dollars are worth less than
before.”

What comes next: Economists caution that the economy may
have hit another soft spot at the beginning of 2022. Inventory
buildup is unlikely to repeat itself, and supply constraints — and
the inflation they are fueling — are expected to continue well into
the new year. Perhaps most significantly, pandemic-era fiscal and
monetary policy is all but exhausted.

“This is likely to be as good as it gets during the current
business cycle,” Joseph Brusuelas, chief economist at the
consulting firm RSM,
tweeted. “We expect growth to arrive near 4% this year
when all is said and done and then move back toward the long-term
1.7% path in the coming years.”

Appropriators Making Progress on Spending Deal: Report

With government funding set to expire on February 18, House and
Senate appropriators are making some headway on a long-delayed
annual spending deal and could agree on a topline number as soon as
next week, Punchbowl News reports.

Lawmakers may still need to pass another stopgap bill extending
federal funding for a week to 10 days while they wrap up the
omnibus spending bill, Punchbowl adds, warning, that scenario
“is all predicated on an agreement coming together.
Which, we repeat, hasn’t happened yet. The House and Senate will be
back in town next week, and party leaders will need to sign off on
any potential deal. There are lots of moving parts, including
policy riders and the Hyde Amendment, which bars the use federal
funds for abortions.”

HHS at ‘High Risk’ of Mismanaging a Future Public Health
Emergency, Watchdog Warns

The Department of Health and Human Services has failed to
address long-standing weaknesses in its pandemic preparedness and
response efforts, ignoring numerous recommended fixes, a government
watchdog reported Thursday, warning that the ongoing problems mean
the department is at “high risk” of mismanaging future
emergencies.

“For over a decade, we have found issues with how HHS's
leadership prepares for and responds to emergencies, including
COVID-19, other infectious diseases, and extreme weather events,
such as hurricanes,” the Government Accountability Office said in a
report to Congress, its ninth analysis of pandemic relief under the
2020 CARES Act.

The report
says that “persistent deficiencies” in how HHS handles public
health emergencies have hindered the national response to the
current pandemic and previous threats.

Those deficiencies include failures to establish clear roles for
and understanding the limitations of various partners involved in
response efforts; problems collecting and analyzing data; and
shortcomings in communicating with the public and building
trust.

The problems have spanned many years and multiple
administrations. GAO said that since 2007 it has made 115
recommendations to HHS regarding its leadership and coordination of
public health emergencies — but 72 of those have yet to be
addressed. The lingering issues could spell trouble for the future,
the report warns. “As devastating as the COVID-19 pandemic has
been, more frequent extreme weather events, new viruses, and bad
actors who threaten to cause intentional harm loom, making the
deficiencies GAO has identified particularly concerning,” it
says.

To help ensure that Congress and the executive branch pay
attention to the problems, the GAO said it was adding HHS
preparedness and response leadership to its high-risk list of parts
of the federal government susceptible to waste, fraud, abuse or
mismanagement or otherwise needing “transformation.” The list now
includes 36 agencies and programs.

What’s next: HHS officials said Thursday that they were
reviewing the report and were working to address the problems. "We
share GAO’s focus and urgency in battling this once-in-a-generation
pandemic and desire to ensure we never again face a pandemic of
this magnitude," an HHS spokesperson said. "We’re in a much
stronger position than we were a year ago."

Politico’s Sarah Owermohle
reports that the GAO’s critical assessment of HHS
comes just days after Senate health committee Chair Patty Murray
(D-WA) and ranking Republican Richard Burr (R-NC) proposed
legislation to address pandemic preparedness. Their bill “would
require HHS secretaries to appoint a committee to advise on
messaging during public health crises and would require a
bipartisan-appointed 9/11-style commission to assess the Covid-19
response,” Owermohle notes.

Obamacare Enrollment Hits Record 14.5 Million

About 14.5 million people have signed up for health insurance
under the Affordable Care Act during the current enrollment period,
the White House announced Thursday.

In a statement, President Biden attributed the record number to
more generous subsidies included in the $1.9 trillion American
Rescue Plan, and noted that the enrollment period is still open in
some states, including California, New Jersey and New York.

With those subsidies scheduled to expire at the end of the year,
Biden called on lawmakers to pass his stalled legislative package,
which includes more premium assistance for Obamacare participants.
“As long as any American lies awake at night, wondering how they’re
going to pay their medical bills, my administration will keep
fighting to lower costs and expand health coverage even more —
including through my Build Back Better agenda,” he said.

Quote of the Day

“It’s just a matter of numbers. I mean, there’s just no
question that you take a billion tests out of the supply chain, and
it’s going to have an impact.”

– Kurt Proctor, senior vice president of strategic
initiatives at the National Community Pharmacists Association, in a

Roll Call article detailing claims by governors
and pharmacists that the Biden administration’s plan to make 1
billion rapid Covid-19 tests available to the public is worsening
supply shortages.

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