Last week’s dismal GDP growth number occurs as President Biden ends the use of the term “Bidenomics,” not because his policies don’t work, but because you are too dumb to understand them.
Last week’s dismal GDP growth number will prove to be the last gasp of “Bidenomics,” a word that will live in political infamy for decades to come as an example of why never to put lipstick on the proverbial pig. Less than a year ago, the Biden Administration attempted to take control of the economic debate by insisting the average consumer, who is now paying close to 20% more for anything and everything since he took office, had no idea what they were talking about by insisting that the President’s economic policies, known as Bidenomics were working. As they described it, “President Biden and Vice President Harris came into office determined to rebuild our economy from the middle out and the bottom up, not the top down—and that strategy is working. Even as they faced an immediate economic and public health crisis—with a raging pandemic, elevated unemployment, snarled supply chains, and hundreds of thousands of small businesses at risk of shuttering—the President and Vice President understood that it wouldn’t be enough to simply go back to the economy we had before the pandemic.” Instead, the key was to “to move beyond these failed trickle-down policies and fundamentally change the economic direction of our country.” The plan, which they labeled “Bidenomics” themselves, was a new “economic vision centered around three key pillars: Making smart public investments in America, Empowering and educating workers to grow the middle class, Promoting competition to lower costs and help entrepreneurs and small businesses thrive.” At the time, they were able to claim Bidenomics was a success by taking credit for the natural rebound of the economy after the pandemic, a process that was already in place before President Biden took office and was promised by his predecessor, Donald Trump, when he insisted to jeers from the media that there would be a V-shaped economic recovery. Therefore, it was no surprise that economic growth was strong in 2021, with Gross Domestic Product rising 5.95% along with the greatest job growth in history as unemployment plummeted from 6.7% to 3.9%. Even so, Business Insider noted that there was still obvious room to grow at the time simply in continuing to bounce back from the pandemic, “The recovery is far from complete. Roughly 6.3 million Americans remain jobless. Labor force participation is stuck well below pre-pandemic levels, signaling many people aren’t yet ready to return to the workforce. And the pace of job gains slowed sharply in the last months of last year.” Hence, 2022, which is the first year Bidenomics was fully in effect, both continued the recovery from the pandemic and saw startling declines in economic and job growth. GDP slowed to a sluggish 2.06% and new jobs sputtered accordingly.
To some extent, these developments were entirely natural given the unprecedented nature of the pandemic itself, where governments around the world willingly shut down their economies without any real plan to reopen them, but one key pillar of Bidenomics, “making smart public investments in America,” translated directly into keeping elevated spending levels that were supposed to be temporary measures to cope with the pandemic running indefinitely, unleashing inflation not seen in decades via an over 50% growth in the size of the federal budget compared to 2019. The impacts of this were obvious by January 2023 as the final economic data from the previous year was released, complete with two quarters of declining growth which under normal circumstances would have been called a recession. “We are seeing the labor market slow pretty substantially,” explained Julia Pollak, chief economist at ZipRecruiter, noting that the October and November 2022 numbers had already been revised down by a combined 71,000 jobs. “The underlying rate of job growth is around 150,000/140,000, and that will continue to gradually slow in the coming months until the Fed takes its foot off the brake pedal.” Looking more closely at the numbers revealed some additional challenges. In the last six months of 2022, 92% of new jobs were in three sectors, two of which were heavily impacted by the pandemic and one of which was not good news given rampant deficit spending: Healthcare, leisure and hospitality, and the government. “Typically, job growth is more broad-based,” Ms. Pollak noted. “And so outside of those sectors, it’s looking pretty anemic in 2023.” “Those are warning signs that perhaps we could be at risk of some overcooling in the coming months,” she added. Economic growth in 2023 continued under much the same lines with a minor 2.09% increase in GDP and a further slowing in job growth. Similar to 2022, private education and health services and leisure and hospitality were responsible for more than half the jobs created, while government was responsible for almost 25%. As Yahoo News described it earlier this year, “This development is particularly striking given the broader context of a thriving economy, marked by impressive job additions and the robust performance of the tech sector. Despite these broader economic successes, the surge in government jobs reveals a nuanced landscape of employment, raising questions about the sustainability and quality of job growth. Employment gains in government span the federal, state and local levels, with a substantial increase in hiring compared to the previous year. This surge is partly a response to the vacancies left by public servants who exited their roles during the pandemic, alongside efforts to bolster public services that may have been understaffed or overwhelmed in the preceding years.” In other words, Bidenomics so-called results have always been an illusion, a combination of the inevitable recovery from the pandemic which began under his predecessor and would have proceeded naturally in any event, and a massive increase in government spending which necessarily was accompanied by a massive increase in inflation.
These facts, however, were inconvenient for the President and a mainstream media desperate to improve his re-election hopes. They were buried in the fine print of economic news stories like those quoted here, and hidden by an avalanche of misguided speculation about why the average person couldn’t see, understand, and appreciate how awesome the economy was. The result was extensive use of the term “vibecession,” which implied that the only real problem with the economy was how people felt about it. Hundreds of articles were written by everyone from The New York Times to Bloomberg with The New Yorker in between that attempted to explain why this average person, many of whom were experiencing the most rapid increase in prices and the highest interest rates in their lifetimes, might have concluded the economy sucked even though it was actually great. More than one of these, wondered if the “vibecession” was finally coming to an end and the average person was waking up to the realization of how good they had it. In January 2024, Nobel Prize Winning economist Paul Krugman, asked that very question and you can probably guess the answer. “First, the economy has healed: Inflation has plunged without any major rise in unemployment. Second, Americans finally seem to be noticing the good news.” Naturally, he concluded that the problem has always been with the people themselves, even some of those “real card-carrying experts” Dr. Anthony Fauci loves so much, “If the vibecession is ending, why? One answer is that good news takes time to filter into public perceptions. I mean, even some professional economists haven’t caught up and are still talking about stubbornly high inflation; we shouldn’t have expected everyday people’s perceptions to turn on a dime.” Of course, inflation didn’t simply continue to fall in a straight line since and remains “stubbornly high,” something one would think a Nobel Prize winner would have acknowledged based on the historical record. Regardless, that didn’t stop The New Yorker from asking whether “historic job growth” might finally end the vibecession earlier this month. John Cassidy reacted to the positive March jobs report, “For months now, one of the key questions—perhaps the key question—in American politics has been when, and if, good economic news will feed into the polling data on the Presidential race. Growth in employment and G.D.P. has been much stronger than expected, and the inflation rate has come down faster than predicted.” In his view, “There are at least three explanations for why Biden’s ratings haven’t benefited from these developments: the consumer-prices theory, the lags theory, and the vibes theory. The prices theory emphasizes that price levels—and the overall cost of living—remain high, despite much lower rates of inflation. The lags theory says that people’s perceptions about politicians and economic policymaking can take quite a while to catch up with a changing environment. The vibes theory says that, for whatever reason, many Americans’ subjective feelings about the economy have lost touch with reality.” Throughout all of these articles and many more, the underlying message couldn’t be more clear: The economy is fantastic, President Biden should by all reason and rights benefit, but there’s just something wrong with those silly voters that don’t understand how lucky they are or how good they have it.
Earlier this month, the reality that inflation will not be tamed too easily intruded on the fantasy. Last week, GDP growth did the same. As CNBC described it on Thursday, “U.S. economic growth was much weaker than expected to start the year, and prices rose at a faster pace, the Commerce Department reported Thursday. Gross domestic product, a broad measure of goods and services produced in the January-through-March period, increased at a 1.6% annualized pace when adjusted for seasonality and inflation, according to the department’s Bureau of Economic Analysis. Economists surveyed by Dow Jones had been looking for an increase of 2.4% following a 3.4% gain in the fourth quarter of 2023 and 4.9% in the previous period.” Consumer spending, not surprisingly given high prices and interest, historically low savings and skyrocketing credit card debt increased only 2.5%, well below the 3% estimate. Once again, government spending juiced the overall numbers despite a decline in inventory investments and an increase in imports. The GDP overshadowed more bad news on inflation with the personal consumption expenditures price index increasing at 3.4% for the quarter, a huge jump over the 1.8% in the fourth quarter last year. Needless to say markets slumped, with the Dow plunging 700 points at first to finish down 400, though there was some bounce back on Friday. “This was a worst of both worlds report – slower than expected growth, higher than expected inflation,” explained David Donabedian, chief investment officer of CIBC Private Wealth US. “We are not far from all rate cuts being backed out of investor expectations. It forces [Fed Chair Jerome] Powell into a hawkish tone for next week’s [Federal Open Market Committee] meeting.” The combination of anemic growth and a supposedly unexpected increase in inflation prompted some to wonder if the dreaded “stagflation” of the 1970s was back. Fortune Magazine noted that “The U.S. economy might be out of the frying pan and into the fire. After months—even years—of planning for a recession, the country may find itself facing a different sort of calamity: stagflation.” “I’m not worried about one data point, but nobody’s really prepared for that scenario, and that’s difficult to hedge,” Mark Haefele, UBS global wealth management investment head, told MarketWatch. The continued resiliency of the job market has prevented full on stagflation, but fears are worsening that jobs alone cannot sustain the economy forever and “Stagflation is a particularly difficult situation to handle because trying to fix one of the contributing factors can sometimes make the others worse. It’s also a big worry for investors because it leaves them with no reliable source of returns. During periods of low growth and high rates, the stock market suffers, while the bond market declines in periods of high inflation.”
In response, what did President Biden do? Address the underlying spending issue and cultivate the broad based, private sector recovery the United States desperately needs? Of course not. Instead, he has simply stopped using the term Bidenomics altogether. As USA Today described it this weekend, “over time, all the ‘Bidenomics’ talk has disappeared. During a recent campaign swing this month in Pennsylvania − in which Biden made three stops and sought to contrast his economic agenda with former President Donald Trump’s − Biden never mentioned the term ‘Bidenomics.’ Nor did he utter the phrase during separate addresses to electrical workers and builders unions over the past week. Or Thursday in Syracuse, N.Y., where he announced more than $6 billion in subsidies for two microchip factories.” Laughably, they continued to report that the White House had concluded “too many Americans didn’t know what ‘Bidenomics’ meant,” meaning that once again the problem is not with the Administration, but those too stupid to understand the genius. “‘Bidenomics’ could mean anything to people, and we needed words or phrases that communicate more −like jobs, (tackling) rising costs and ‘junk fees,’” explained Celinda Lake, a former Biden campaign pollster in the 2020 election. “‘Bidenomics’ ended up being confusing to voters because they thought it was Biden’s economy rather than Biden’s economic policies” whatever that means given we only have on president at a time and it certainly is his economy, whether he likes it or not. “From the White House’s perspective, ‘Bidenomics’ was supposed to encompass an economic platform focused on growing an economy ‘from the middle out and the bottom up’ − cutting health-care costs, forcing billionaires to ‘pay their fair share’ in taxes, eliminating so-called ‘junk fees’ and leveraging the federal government for historic investments in manufacturing of microchips and clean energy, infrastructure and innovation…But the calculus ignored a reality: When much of the country heard ‘Bidenomics,’ it reminded them of high inflation, not Biden’s efforts to make the U.S. a microchip hotbed or the nation’s economic rebound since the pandemic. Meanwhile, the outlook on the economy remains sour. In a New York Times/Sienna College poll this month, only 21% of voters described the economy as ‘excellent/good,’ compared to 79% who called it ‘fair/poor.’”
In other words, everyone knows the economy sucks except Joe Biden, but now I am repeating myself. If indeed these plans, whether on infrastructure, microchips, taxes, junk fees, or anything else, were actually producing the results they promised, there’d be no need to split hairs over what Bidenomics referred to because he’d be happy to have his name associated with a booming economy. That they are, shall we say, rebranding on the issue, tells you all you need to know and then some.
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