“The West Wing may believe Bidenomics is working because the macroeconomic
gurus at the Federal Reserve are telling the White House it’s working. But
Bidenomics has failed to create sufficient tangible improvement in the lives of
most voters in a world in which groceries still cost more than they did a year
ago, average rent and mortgage rates have spiked and health and child care grow
ever more unaffordable. Mr. Biden cannot win in 2024 unless he speaks to the
economy as it is, not as he wishes it was,”Karen
Petrou, NYTimes.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3
percent on a seasonally adjusted basis in November, after rising 0.2 percent in
each of the previous 4 months, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the
all items index increased 2.7 percent before seasonal adjustment.
As shown in the FRED cpi graph dating from 2000, the last inflation surge
began in 2020 during the Biden administration and the COVID-19 pandemic. A
majority of voters in the presidential election decided prices and inflation had
been too high for too long, therefore President Biden was blamed for it.
But no, it was the pandemic’s sudden supply shortages that caused the surge,
not Biden’s Bidenomics’ legislation that enabled the quickest recovery in the
developed world. Yet it took 3.5 years for inflation to return to today’s 2.7
percent annual rate, still above the Fed’s 2 percent target goal.
But there was another reason for the anger over such high and prolonged
inflation. The incomes of half of U.S. households could not keep up with the
inflation surge. Most of the increase in household income was achieved in the
period from 1970 to 2000. In these three decades, the median income increased by
41%, to $70,800, at an annual average rate of 1.2%, says PEW Research.
The warning shot about the discontent of American workers was written in 2023
by Karen Petrou, a NYTimes guest columnist, in which she said that “ 64
percent of households live paycheck to paycheck from time to time, according to
a
March consumer survey. These families are barely making it through
the week, let alone accumulating the wealth essential for financial resilience
and, over time, financial security.’
Why such an increase in income inequality? A series of recessions (gray bars
in the FRED graph) occurred during tempestuous times—the Gulf War, the various
wars on terror in Iraq and Afghanistan, the Great Recession, and busted housing
bubble.
The median household income in 2015 – $70,200 – was no higher than its
level in 2000, marking a 15-year period of stagnation, an episode of
unprecedented duration in the past five decades.
The unemployment rate rose from 4.2 percent to 5.7 percent during the
shorter-lived 2001 recession (and 9/11 Twin-towers attack). It rose from 5
percent to 10 percent during the Great Recession that ended in 2009. And those
in the lower ‘income brackets suffered the most financial damage, as is always
the case.
And the reason for those recessions was in large part because “it
is like a poker game where the chips have become concentrated in fewer and
fewer hands,” again quoting Roosevelt’s Federal Reserve Chairman at the
time.
Ms. Petrou concluded, “Listening to advisers — not voters — is a fatal
campaign error, one that Hillary Clinton made in 2016. Mr. Biden only narrowly
pulled out a win in 2020 because Mr. Trump wasn’t listening to voters when it
came to Covid. Now they’re tuned in to Mr. Trump’s perspective on the economy
because he is, in his way, listening to them.”
The irony is that it is just those Bidenomics’ programs that are funding
factories in many of the red states that can help to ease the inequality that
has affected so many working folk, and that is the source of most of the
discontent.
Harlan Green © 2024
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
