Household Data Explains Stagnant Biden-Harris Economy
What is at issue behind all the numbers is the economic effect of Biden-era federal fiscal policies and monetary manipulation by the Federal Reserve.
With the Federal Reserve signaling that it is about to start decreasing interest rates, though slowly, investors and Vice President Kamala Harris are hoping that the rate reductions will lead to a greatly desired “soft landing,” in which inflation stays at its recent 2.5 percent annual rate without bringing on a recession. For Harris, good economic numbers through Election Day are vital.
Tuesday’s report from the U.S. Census Bureau on household income, poverty, and health care in 2023 should give them pause. The new data “explains why so many Americans are sour on the Biden economy. The facts back them up,” The Wall Street Journal reports.
Workers are receiving lower pay after inflation, and the losses have been worst for lower-income workers. “Real median earnings for full-time workers last year declined 1.6% and even more for high-school grads (3.3%),” the Journal reports. “This means inflation outpaced wage gains for most low-wage workers.”
American households are struggling financially in the Biden-Harris economy, the story notes:
The upshot is that real median household income remains lower than in 2019 and has barely grown since 2020. The contrast between the first three years of the Trump and Biden presidencies is striking. See the nearby table.
Government policy did this, the story makes clear:
The Trump tax reform and deregulation boosted growth, which resulted in a tighter labor market and rising wages—without fueling inflation. Federal spending as a share of GDP averaged 20.5% during the first three years under Mr. Trump compared to 25.8% under Mr. Biden. Never has the government spent so much money only to leave Americans poorer.
Health care exemplifies how the federal government under Biden and Harris has diverted activity out of the productive, private sector:
The White House also boasts that “health insurance coverage reached record highs,” but the share of uninsured was the same in 2023 as in 2019, according to the Census report. The difference is that fewer Americans now have private insurance (-2.6%), while more are covered by Medicare (0.8%) and Medicaid (1.7%).
The Journal summarizes the current economic situation as follows: “The truth is that the Biden inflation has left most Americans worse off than they were before the pandemic.”
What is at issue behind all the numbers is the economic effect of Biden-era federal fiscal policies and the government’s delegated management of the nation’s financial system through the Federal Reserve. The past year’s confusing economic numbers have shown unusual combinations of low unemployment, decreasing inflation, and job stagnation for American-born workers; high consumer spending and debt with slow growth of manufacturing; rising stock markets and decreasing real after-tax income for workers; much-higher housing prices and low sales; and regularly occurring downward “corrections” of government data that show past reports on the economy were unduly positive.
Much of this evidence of a highly disturbed economy has been attributed to the 2020 Covid measures, which had an enormous, rapid depressive economic effect and then spurred an equally fast positive correction. The argument is that the U.S. economy is only now recovering from that trauma.
Unfortunately, there is a confounding factor that makes that theory impossible to test: the massive increase in government spending and debt after the economic had already recovered from the Covid lockdowns, beginning in early 2021 and lasting through 2022 (at which point the Democrats lost their majority in the House of Representatives and further spending increases were limited).
I believe that the deficit-spending spree of 2021 to the present is responsible for the drab economy of the Biden-Harris era and its current precarious condition, in which numbers such as rising stock markets and low unemployment contrast with decreasing after-tax income for workers and record increases in federal debt and consumer debt. The federal government after Covid foolishly pushed an enormous expansion of spending by government and consumers alike while suppressing the supply of goods (especially) and services through the record increase in government regulation.
That unleashed inflation and the subsequent attempts by the Federal Reserve to reduce the money supply, followed by nearly a full year of hints that interest rates would soon be brought down and all would be rosy. Those promises have proven false thus far.
We now are assured that the Fed has finally decided to reverse course and start lowering interest rates and suspend its money-reduction policy of selling securities. That, we are told, will get us to a soft landing in which inflation stabilizes near the Fed’s target (2 percent per year) and unemployment does not rise appreciably.
The fundamental problem remains, however: federal spending and regulation are vastly greater than they should be and are relentlessly suppressing the production of goods and services. That is not a formula for rising prosperity, to say the least, and no amount of reinterpretation of the economic numbers or even a soft landing will make it true.