What President Joe Biden fails to see about the economy is where most people live. The administration continues to insist on lauding an economy that is squeezing America’s workers. By touting decidedly mediocre past growth and hoping for future growth from lower interest rates, the White House has lost sight of the present: the squeeze of higher prices and higher interest rates.
On Friday, White House press secretary Karine Jean-Pierre continued trying to talk up the Biden economy: “It’s clear Americans are starting to feel President Biden’s strong economy. Wages have risen faster than inflation for 10 months in a row. The unemployment rate has remained below 4% for the longest stretch in 50 years. Inflation has fallen by about two-thirds.”
Working-class people know there are multiple problems with the administration’s talking points.
First, the Biden economy is not, has not been, and is not projected to be particularly “strong.” According to Biden’s own Bureau of Economic Analysis, in his first year, the economy only rebounded with 5.8% growth — basically a “gimme” coming off 2020’s COVID-19 collapse (when the economy shrank 2.2%). In 2022, the economy only grew 1.9% and shrank in the first quarter (-2.0%) and the second quarter (-0.6%). In 2023, it was a mixed bag: growing just 2.2% in the first quarter and 2.1% in the second quarter before growing 4.9% in the third quarter and 3.3% in the fourth quarter and finishing the year with 2.5% annual growth. The Congressional Budget Office only projects 1.5% growth for 2024. There is nothing “strong” to brag about here.
Yes, the official unemployment rate is 3.7%. However, that’s based on a reduced labor force participation rate of 62.5%. In January 2020, the labor force participation rate was 63.3%. Fewer people in the workforce means those working constitute a higher employment percentage — and conversely, a lower unemployment percentage. If the current labor force participation rate matched January 2020’s rate, America’s workforce would be more than 2 million workers larger, and the unemployment rate would be 5%, not 3.7%.
As for the claim that “wages have risen faster than inflation for 10 months in a row,” the problem for America’s working class is that Biden’s inflation has all but swallowed up these wage gains. Consumer prices remain extraordinarily high — much higher than when Biden first took office.
And for the White House to claim that inflation has “fallen by about two-thirds” is to disregard the fact that it fell from the Biden administration’s own peak of just over 9%. You don’t get credit for fixing a problem you created — especially when it’s not yet fixed.
What is clear from their talking points is that the Biden administration doesn’t understand inflation and its debilitating effects. Inflation numbers are a measure of past price growth. If prices go from a base of, let’s say, $100 to $120, that’s a 20% price increase. A slower inflation rate after this fact has no effect on the price rises that have already taken place. The previous price spikes are embedded — slower current growth does not wipe those away.
It is these embedded price jumps that consumers are struggling to pay. And they are continuing to fall behind. As the Committee to Unleash Prosperity has shown, over the first 35 months of Biden’s presidency, real wages have shrunk by almost 3.5% for all employees due to continued high prices.
What’s more, they are also paying the cost for the Federal Reserve’s interest rate hikes (11 times and from near zero to 5.25 to 5.5%) to cool Biden’s inflation inferno. The rapid and robust interest rate increases mean that consumers must pay more on all their borrowing, such as credit card balances and bank loans. On larger items, such as houses, they can be shut out entirely by prohibitively high mortgage rates.
That Biden owns America’s inflation and interest rate problem is implicit in the administration’s talking points: Of the four points Jean-Pierre tried to make, inflation was two of them.
Biden owns it because it started during his presidency, jumping from 1.4% in January 2021 to 9.1% in June 2022. And it started during his presidency because he has refused to stop his profligate spending. Over Biden’s first three years, he has spent $5.9 trillion over the 2019 pre-COVID spending baseline and has run up deficits as percentages of GDP of 12.1%, 5.4%, and 6.3%. That’s 23.8% of GDP in total — almost a quarter of everything America’s economy produces annually just in overspending. And the kicker? Biden wanted more, but even his own party wouldn’t give it to him.
America is rightfully aggrieved at Bidenomics. The administration only adds insult to injury when it lectures the public on an economy that Biden bureaucrats aren’t living in. If, like the Biden administration, people could live beyond their means, run up gargantuan deficits, ignore the interest rate costs on such debt, and not have to worry about paying any of it back, then they wouldn’t have economic problems either.
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J.T. Young was a professional staffer in the House and the Senate from 1987 to 2000, served in the Department of Treasury and the Office of Management and Budget from 2001 to 2004, and was the director of government relations for a Fortune 20 company from 2004 to 2023.
