- The U.S. has recently seen consistent economic growth that has been fueled by strong consumer spending from average Americans.
- To sustain this level of consumer spending, Americans are draining their savings, spending more than they are bringing in as their wages stay stagnant or decline, according to experts who spoke to the Daily Caller News Foundation.
- “The high probability of recession in the near term is very troubling when coupled with the decline in savings,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “People need more savings today than ever to cope with the higher cost of living, and instead, many families are headed into the next recession with less savings and more debt.”
(Daily Caller)—Under President Joe Biden, economic growth has been partly sustained by Americans spending through their savings on everyday goods, according to experts who spoke to the Daily Caller News Foundation.
Gross Domestic Product (GDP), a measure of economic growth, has remained persistently high, coming in at 2.1% for the second quarter of 2023, even as the Federal Reserve has attempted to tame growth through hikes of its federal funds rate. The main contributor to U.S. GDP is consumer spending, which has managed to notch consistent increases at the expense of the savings of average Americans, experts told the DCNF.
“Consumption is about 70 percent of GDP growth, so naturally any additional consumption by households and businesses is going to add to GDP,” Ryan Ellis, president of the Center for a Free Economy, told the DCNF. “But to the extent that consumption is fueled by one time windfalls from the government, it’s basically bringing future consumption into the present. Eventually, the lack of real income to justify the higher consumption will catch up with the households and businesses.”
The Personal Consumption Expenditure, a measure of the amount Americans have spent on consumer goods and services, as a percentage of GDP has stayed slightly elevated since the second quarter of 2022, staying around 68%, while a number closer to 67% has been more common over the last decade, according to the Federal Reserve Bank of St. Louis (FRED). In the second quarter of 2023, it made up 68.1% of GDP.
“In this case, it’s the excess savings,” Ellis told the DCNF. “Those are still being worked down. People are drawing down those savings to counter inflation increasing their core goods and services faster than income growth.”
Personal savings have declined in recent months, falling from over $1 trillion in May to just $794.1 billion in August, paling in comparison to the nearly $6 trillion Americans had saved in April 2020 at the early stages of the COVID-19 pandemic, according to FRED.
Inflation remained high in September, rising 3.7% year-over-year for the month, following the same rise for the month of August. Core inflation, which excludes the volatile categories of energy and food, was even higher for the month of September, rising 4.1% for the year.
Inflation, as measured by the personal consumption expenditures (PCE) price index, peaked at 7.1% in June 2022. In August, PCE inflation stood at 3.5%. Are there risks that might cause PCE inflation to take longer to drop or potentially heat up again? https://t.co/AAjkTqcCxn pic.twitter.com/7PhZwGugIU
— St. Louis Fed (@stlouisfed) October 20, 2023
“In the last three months for which we have data, the growth in consumer spending has outpaced income growth,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the DCNF. “Consumers have been using savings and going into debt to fuel their spending. That’s providing a temporary boost to GDP but the decline in savings is also throttling investment, the key driver of long-run economic growth. Savings have been trending down for nearly the entire tenure of the Biden administration because that’s precisely the period in which we’ve had inflation above the pre-pandemic trend.”
Real wages have declined 2.1% from the first quarter of 2021 when Biden took office compared to the third quarter of 2023, according to FRED.
The Biden administration has repeatedly insisted that the economy is in good shape, pointing to the president’s signature economic policy, “Bidenomics,” as the reason. Despite the insistence, many experts have pointed to the high-spending policies at the core of Bidenomics as the cause of the recent sustained high inflation.
“Alas, the U.S. savings rate has plunged back down to normal low levels today,” Chris Edwards, the Kilts Family Chair in Fiscal Studies at the Cato Institute, told the DCNF. “The low savings rate is a concern because it may indicate that Americans expect the government to bail them out if a recession or another crisis hits.”
The Fed has been keen on trying to avoid a recession, even as it keeps rates at a 22-year high. Despite this, Jerome Powell, chair of the Fed, noted at the end of the September Federal Open Market Committee meeting that an economic soft landing, meaning a slowdown in market growth without triggering a recession, was not a “baseline expectation” for the Fed.
“The high probability of recession in the near term is very troubling when coupled with the decline in savings,” Antoni told the DCNF. “People need more savings today than ever to cope with the higher cost of living, and instead, many families are headed into the next recession with less savings and more debt.”
Household debt shot up to a new high in the second quarter of 2023, with Americans collectively owing $17.06 trillion, with $1 trillion of that being held just in credit card debt.
“The notion one often hears by left-of-center analysts is that savings are bad for the economy, but this is based on faulty Keynesian theories,” Edwards told the DCNF. “Savings are hugely positive for the economy because they are the corn seed of growth. Savings fuel capital investment and expansion.”
The White House did not respond to a request to comment from the DCNF.
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Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.