Will Washington Policies Trigger a Recession?

The wrangling on Capitol Hill over a massive infrastructure package at a time of high inflation has some of the commentariat fretting about the economic impact of trillions of dollars in federal spending. Here’s what Chief Investment Officer Jim Lowell said in our recent webinar, Booster Shots, Market Shocks and the End of Fed Intervention:*

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Jim Lowell:

Those of us who balance our checkbooks on a regular basis understand that you can’t just continue to spend as if you never have to fund the accounts. That said, the trillions of dollars of spending that we have seen (and that we are hopefully going to see, with the infrastructure spending coming down the pike) represents job-creating moments in a consumer-driven economy—a net positive. It creates lasting skilled jobs and higher-wage labor jobs relating to everything in the infrastructure sphere. That’s roads, bridges, sewer systems, existing energy and alternative energy grids.

And those are projects that require hundreds of millions, billions, even trillions of dollars to get going in a massive way. I am a little bit more positive about the infrastructure spending than the spending we saw during the pandemic. That support was essential, but it was not true “spending”—it was aid at a time of absolute crisis. That crisis, hopefully, thankfully, is more astern than ahead.

That means this next round of federal spending can help on the job-creation front and maybe make our roads a little bit safer and travel and water systems a little bit better. I don’t think it will trigger a recession. In fact, it could stave off a recession for a while longer.

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