Dismiss campaign hype: The U.S. economy is strong

In recent years, wages have gone up; hundreds of thousands of American jobs have been added; unemployment fell; the nation’s Gross Domestic Product (GDP) is growing better than other developed countries, according to the International Monetary Fund; the stock market is booming; and inflation has dropped substantially, and even mortgage rates have stabilized to a more typical level.

Nevertheless, Americans are skeptical, if not angry; just 35% approve Biden’s handling of the economy.

Again, GDP is up 3.3%. The Dow Jones Industrial Average topped 38,000 (on May 3, it closed at 38,675.68 – about 24% better than when Biden was inaugurated on Jan. 20, 2021, when it closed at 31,186.20). and the S&P 500 returned 26% including dividends in 2023, reported Goldman Sachs – more than double the average annual return since 1986.

“The economy is more than pretty good. It’s VERY good,” says Bob Bruno, a Professor of Labor and Employment Relations at the University of Illinois. “Consider that union members got 6.3% wage increases in the past year, the highest since 2001. Non-union got 4.1%.”

The intensely even-handed Associated Press agreed, reporting, “The U.S. economy is rock solid.”

Economist Frank Manzo IV of the Illinois Economic Policy Institute echoes their judgments.

“The U.S. economy is robust and humming,” he says. “Unemployment has been below 4% for over two years, payrolls have increased by an average of more than 200,000 jobs each month for the past year, the S&P 500 is up 33% since Biden’s inauguration, and Gross Domestic Product has grown faster than most economists predicted.

“While there are headwinds and cracks starting to form, the probability of a recession occurring in the next 12 months is generally pegged at around 30% or so,” he continues. “The biggest reason for optimism for the overall economy is the large increase in wealth that households have accrued – and can tap into. U.S. households now have about $150 trillion in wealth, which has grown by 34% in the last four years. The recent increase in immigration has also strengthened both the labor market and entrepreneurship, boosting employment growth by about 100,000 jobs per month.”

 

JOBS & PAY

Last month, more than 300,000 jobs were (experts predicted a gain of 214,000) – meaning about 15 million jobs have been added since Biden’s term started).

Last years, ended with a 3.7% jobless rate, with wages having increased 4.1%, according to the national Economic Policy Institute.

 

INFLATION

Year to year, the Consumer Price Index this spring showed food at home was up 1.2% and gasoline was up 2.2%, nationally and in the Midwest.

Mortgage rates – which skyrocketed to 18% during the Reagan administration in the 1980s – are now below 8%, according to U.S. News’ Erika Giovanetti, who wrote, “While today’s mortgage rates are high compared with just a few years ago, they’re actually quite typical from a historical standpoint.”

Two years ago, inflation was about 9%; now it’s about 3% (See chart).

“Inflation in the U.S. has fallen as quickly as it shot up,” Manzo says. “It remains a global problem, with rates of inflation as high in countries like Canada, Australia, the United Kingdom, and Japan as it is in the United States. Inflation also remains over 4% in Mexico.

According to The Economist magazine, since the end of 2019 the U.S. economy has grown about 8%, while the European Union has grown about 3%, Japan 1%, and Britain not at all. Also, economic analyst Steven Rattner and economist Brendan Duke reported that entrepreneurship in the U.S. is booming, with 5.2 million “likely employer” business applications filed between January 2021 and December 2023, more than a 33% increase over those filed between 2017 and 2019.

Inflation is worldwide, and no U.S. President has control globally. The U.S. annual inflation rate is up 2.8% over the year, the CPI said in March, compared to the European Union’s 3.1%, Japan’s 3.21% and the United Kingdom’s 3.25 – much less Turkey’s 68% and Venezuela’s almost 200%.

“I’m not sure inflation is really a problem in the U.S.,” Bruno says. “Consumers and employers have largely shook higher prices off. Interest rates are a drag but still, growth continues.”

Before Biden took office, the Federal Reserve started “quantitative easing” (buying a lot of mortgage bonds and government debt); the Trump administration and the 116^th Congress spent trillions in reaction to the COVID pandemic, increasing the budget deficit; and housing costs ballooned 14.6% from mid-2020 to early 2021.

“You put that together and it is challenging to make the case that there would be no inflation,” said Campbell Harvey, a Duke University finance professor. “But again, we just don't know the counterfactual” [ – a psychological concept involving the tendency to conjure alternatives to events that have already happened].

Indeed, before Trump left office, nonfarm employment had fallen by 1.4 million jobs in March of 2020 and another 20.5 million the next month; joblessness was at 6.3%; GDP was down 3.5%.

“Inflation was driven by supply-chain shocks associated with the pandemic and global wars – not increases in consumer demand or worker wages. Historically, inflation has been linked to war and conflict. That’s because governments directly involved issue more currency and borrow to finance the wars, demand shifts and the supply chain has to adjust which drives up prices, and war-torn countries produce fewer goods and services. We have major wars right now with the Russian invasion of Ukraine and the war in Palestine. Ukraine, for example, is a major producer of agricultural products, like wheat and corn—which has driven up food prices.”

 

2/3 OF US ARE DISSATISFIED.

The 35% of U.S. adults approving of Biden’s handling the economy is up slightly, according to an Associated Press/NORC Center for Public Affairs Research, which said the same percentage sees the national economy as good.

“Economic and consumer sentiment has become more politicized than ever before,” Manzo says. “When the Presidency flips, people who identify with the losing party go from being optimistic about the economy to thinking the sky is falling. With that said, the primary concern is about inflation—and specifically the price level, not the rate of change. Consumers are seeing food prices rising by 25% and their homeowners insurance and car insurance premiums doubling, which has negative impacted their outlook.”

 

FLOODED BY A FIREHOSE OF LIES, DISASTER LOOMS

If the economy’s good, why’s the mood bad? Consider the outrageous rhetoric coming from Trump.

At a Georgia rally in March, the presumptive GOP presidential nominee said, “Inflation wouldn’t have happened” if he’d been re-elected in 2020, ignoring the after-effects of the pandemic.

He’s called the United States a “commercial wasteland,” a “cesspool,” a “disaster” and claimed, “Under Biden we have a three-year inflation rate of almost 50%. Under me you had no inflation.”

If voters accept the hogwash, a second Trump administration could spell economic disaster, with the ex-President promising to cut the labor supply by deporting immigrants (even those here legally); devalue the dollar, launch tariffs of at least 10% (which, since tariffs are basically a tax on imports, are passed along to consumers, who pay more), and strip the Federal Reserve of its independence (according to the Wall Street Journal). Plus, returning him to the Oval Office could revive the chaos from before, which will shake investor and consumer confidence.

For all the facts at hand and the dangers ahead, Trump’s political handmaidens, such as Central Illinois’ Congressman, U.S. Rep. Darin LaHood (R-Peoria)m echo Trump’s lies. Darin LaHood commented, “By every measure, our country was better off with President Trump’s leadership in the White House.”

 

THE REAL CULPRIT: PRICE GOUGING

Asked whether public discontent stems from grassroots expectations, misinformation or something else, Bruno says, “Think post-COVID hangover and the initial sharp spike of inflation in basic goods.”

The real reason groceries and gas cost what they do, according to AFL-CIO President Liz Shuler, is “greedflation.

“Corporations used the market chaos of the pandemic as an excuse to price-gouge working families to pad their profits,” Shuler said. “Even as supply chains returned to normal, corporate greed drove 53% of inflation for the second half of last year.”

Manzo agrees.

“There is some evidence for the price-gouging theory,” he says. “Corporate profits after taxes have increased by about $1 trillion since prior to the pandemic, growing nearly 50%. That’s much faster than the 21% total rise in inflation since January 2020. Corporations saw their profits rise substantially in 2021 and 2022, and instead of cutting prices as their input costs decreased and passing it onto the consumer, they have largely decided to keep their prices high to in order to retain high profit margins and satisfy shareholders.”

In fact, corporate profits are breaking records, reaching an all-time high last year: $2.8 trillion, according to the Commerce Dept.

A few examples of 2023 profits, according to Macrotrends.net: Albertson’s grocery chain $21 billion, Apple $100 billion, Nike $22 billion, Verizon $79 billion, and Walmart $155 billion.

Economist and former Labor Secretary Robert Reich said, “The structural driver of inflation [is] the concentration of the American economy in the hands of a few corporate giants with the power to raise prices,”

 

IN HINDSIGHT, BIDEN INVESTED IN THE COUNTRY.

In “free market” economies – especially one like America’s, still operating after years of Republican deregulation – government has little say in product pricing. However, under this system, Biden didn’t upend the economy but skillfully used politics. Instead of exaggerating or alienating Congressional opponents (much less his own advisers), like his predecessor, the President worked with Republicans and ensured bipartisan government investments in the nation to the tune of $4.2 trillion, including the American Rescue Plan, the Bipartisan Infrastructure Law, the CHIPS and Science Act, and the Inflation Reduction Act.