The Best Economic Growth in 37 Years

Plus, HHS at ‘high risk’ of bungling future public health crisis ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ [The Fisc](   By Yuval Rosenberg and Michael Rainey 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. News - [Growth Is Surging in Biden’s Economy. Why Don’t Voters Feel Better?]( – New York Times - [Breyer’s Retirement Gives Democrats a Dose of (Cautious) Optimism]( – New York Times - [Pressure Mounts in Congress for IRS to Give Taxpayers Relief]( – Politico - [IRS Wants to Scan Your Face]( – Washington Post - [Biden Ally in House Floats Lower Child Tax Credit Income Cap]( – Bloomberg - [Biden’s Signature Legislation Expired. Recipients Are Wondering: WTF Happened?]( – Politico - [Pharmacies, Governors Say Biden Test Program Is Depleting Supply]( – Roll Call - [January's Treasury Losses Were Brutal, but It May Be Just The Start]( – Bloomberg - [How to Get Free N95 Masks From the Government]( – New York - [Yes, Omicron Is Loosening Its Hold. But the Pandemic Has Not Ended.]( – New York Times - [U.S. Coronavirus Hospitalizations Slow, With the Northeast Showing a Steep Decline]( – Washington Post Views and Analysis - [Preventing the Next Pandemic Requires a Health Overhaul]( – Washington Post Editorial Board - [How Full Is the U.S. Recovery? Inflation’s Impact Obscures the Answer.]( – Ben Casselman, New York Times - [Strong Economic Growth Wrecks the GOP’s Gloom-and-Doom Spin]( – Paul Waldman, Washington Post - [Biden's Economy Gives GOP Governors Money to Burn]( – Conor Sen, Bloomberg - [There’s Another Way to Extend the Child Tax Credit]( – Grace Segers, New Republic - [The Case for Restoring Discretionary Spending Caps]( – Committee for a Responsible Federal Budget - [How Much Has the Pandemic Cost?]( – Andrew Sheng and Xiao Geng, Project Syndicate - [Are Price-Gouging Consumer Giants to Blame for High Inflation?]( – Stephanie Flanders and Michael Sasso, Bloomberg (podcast) - [It’s a Pandemic Miracle: I’m Defending the FDA Against Ron DeSantis]( – Megan McArdle, Washington Post - [Breyer’s Retirement Gives Biden a Fresh Opportunity for a Badly Needed Victory]( – Dan Balz, Washington Post Copyright © 2020 The Fiscal Times, All rights reserved. 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