There are a handful of indicators that show the U.S. economy is in a worse condition than previously thought.
S.T. Karnick, senior fellow at the Heartland Institute, a Chicago area think tank that offers free market solutions, says the economy is definitely in a much worse place than the stock market had been indicating before it's recent major drop across the board.
"Consumers are taking on large amounts of debt and of course interest rates for housing," said Karnick.
Along with that, Karnick said consumer spending has to really be looked at too. It drives about two thirds of the nation's gross domestic product.
"Consumer spending has been down in terms of retail spending and even service spending has been decreasing," Karnick said.
Industrial and service production has decreased and continues to decrease as of late. Despite that, the stock market did well up and was rising up until recently. Karnick believes this is an outcome of distortion put into the economy starting in 2020.
"During 2020, we had covid and we had tons of helicopter money thrown at the public and we had massive amounts of government spending," Karnick explained. "The economy had already recovered by January 2021 and at that point the new (Biden) administration started an incredible amount of additional federal spending."
Karnick cited the American Recovery Plan and the Inflation Reduction Act where a bunch of money went into the economy, leading to inflation which affects everybody. During that same time there was a significant decrease in production of goods and services from the lockdowns, a decision by the government.
In a recent statement from Federal Reserve (Fed) chairman Jerome Powell, the central bank might start lowering interest rates in September. However, a cut of 0.25 percent in September may be too small and too late to have an impact. In 2022 and 2023, interest rates were raised at an extremely fast rate. At the same time, the Fed also sold their securities which decreases the money supply.
"The fundamentals of the economy have been messed up by the federal government and the Federal Reserve has done what it always does which is react by raising or lowering interest rates too high, too fast and too late," said Karnick.
Plenty of economists have been predicting a recession to occur. Karnick said the biggest problem with a potential recession is too much federal spending and federal overregulation.