Biden Thinks There Won’t Be a Recession — or Worst Case, a Slight One

A worried couple looks at paperwork and a laptop.

Image source: Getty Images

It’s reassuring news at a time when so many people have alarm bells ringing.

Important points

  • Many financial experts are warning of a protracted recession in 2023.
  • President Biden is confident that will not happen, and if it does, only very slightly.
  • Many financial experts disagree, but you can prepare for the worst by padding your emergency savings and paying off debt.

Will there be a recession in 2023, and if so, how bad will it get? That’s the question that worries many people as we keep reading warnings that economic conditions could get much worse.

But if you ask President Biden, he’s not overly concerned about a recession. In a recent CNN interview, Biden was quoted as saying, “I don’t think there’s going to be a recession. If it does, then it will be a very mild recession.”

On the one hand, this is good news. But whether Biden’s predictions are accurate is another story.

Recession fears are spreading

While it’s good, at least in theory, that the President has such an optimistic view of the economy, the reality is that many financial pundits disagree on recession forecasts. Recently, Jamie Dimon, CEO of JPMorgan Chase, said he expects the US economy to enter a recession within the next six to nine months. And last month, 72% of economists polled by the National Association for Business Economics said they expect a recession by mid-2023, if not sooner.

A big reason so many pundits are concerned about an imminent recession is that the Federal Reserve has been aggressively raising interest rates to slow the pace of inflation. Doing so could result in a large drop in consumer spending — one drastic enough to spur an economic downturn.

Of course, the Fed is hoping that its rate hikes will result in a rather modest decline in consumer spending. But that’s not guaranteed, so it’s wise to prepare for a recession.

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How to prepare for a recession

Whether a recession hits in early 2023, mid-2023, or later, it’s important to realize that recessions are reasonably predictable. We cannot always determine when they will occur, but the economic cycle is such that they must occur at some point. So it’s always a good idea to be prepared.

For now, it might be best to shore up your emergency savings. Everyone, regardless of income level, should aim to have enough cash in a savings account to cover at least three months of essential living expenses. And in the wake of the COVID-19 pandemic, some financial experts say it’s best to have enough cash on hand to cover up to a year’s worth of bills.

It’s also a good idea to offload unnecessary spending ahead of a recession. This can free up cash and also make it easier to adjust to living on less should the need arise.

After all, now is a good time to start paying off costly debt, like that of the credit card variant. Debt payments can be a huge burden during a recession, and given the Fed’s interest rate policy, credit card debt could become increasingly expensive if it continues into 2023.

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All in all, it’s hard to say whether or not Biden’s economic forecasts are correct. But the best thing is to prepare for a recession — even if the economy is spared in 2023.

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