U.S. Economy Could Be In Recession Within Weeks: Reagan Adviser

Art Laffer, a former economic adviser in Ronald Reagan's presidential administration, said on Wednesday that the U.S. economy could be considered in a recession based on the upcoming second-quarter numbers on gross domestic product (GDP).

The well-known economist made the prediction during an appearance on Fox Business Tonight. He discussed various economic issues with host Dagen McDowell, including the nation's soaring inflation and President Joe Biden's plan to ask Congress to suspend the federal gas tax until September.

Recent polls have shown Americans are unhappy with various economic issues, including inflation—which hit a 40-year high in May—and the recent spikes in gasoline prices. After the national average for a gallon of regular gasoline hit $5 for the first time on June 11, it has dipped slightly in recent days. However, the national average for gas was $4.955 on Wednesday, while it was $3.069 at this time last year, according to the American Automobile Association (AAA).

Biden hopes to ease the burden at the pump by suspending the federal gas tax after the Federal Reserve recently raised interest rates in an effort to battle inflation. Biden has also touted the nation's low unemployment numbers as a sign that the economy is good, but Laffer dismissed such positive talk by noting the GDP rate has been declining.

Art Laffer speaks during a panel discussion
Economist Art Laffer says GDP numbers from the second quarter could reveal the U.S. economy is in a recession. In this photo, Laffer is seen speaking during a panel discussion at the Heritage Foundation on December 18, 2014, in Washington, D.C. SAUL LOEB/AFP via Getty Images

"We've had two quarters: One and a half percent decline in GDP, that's actually done the first quarter, and this quarter now is estimated by the Atlanta Fed as being very, very close to zero," Laffer told Fox Business. "If it comes in negative, that will be the two quarters in a row that would be the definition of recession."

Fox Business shared Laffer's comments on its YouTube channel.

As Laffer mentioned, the Atlanta Fed GDPNow tracker's latest estimate of GDP growth from June 16 for the nearly-complete second quarter is 0.0 percent. He also cited an unofficial definition used by many economists of a recession being two consecutive quarters of negative GDP. However, the U.S. Bureau of Economic Analysis states that definition is not an official designation and that recessions are declared by a committee of experts at the National Bureau of Economic Research (NBER).

Laffer is known for developing the Laffer Curve, a theory that illustrates the relationship between tax rates and the amount of tax revenue collected by federal government. Along with being a member of Reagan's Economic Policy Advisory Board, he also served as an economic adviser to former President Donald Trump during his 2016 presidential campaign. In 2019, Trump awarded Laffer the Presidential Medal of Freedom for his work in economics.

Newsweek reached out to the White House for comment.