The White House celebrated its first-year economic achievements by tweeting: “When @POTUS and @VP were sworn in, our economy was on the brink of collapse.”
That is a flat-out lie.
As Biden first set foot in the Oval Office a year ago, real GDP was growing at 6.3 percent, inflation was 1.4 percent, the price of gasoline was $2.39 a gallon and Michigan’s consumer sentiment index stood at 79. Today, real growth has slowed to just over 2 percent, inflation is at 7 percent, gas is up to $3.31 a gallon and the Michigan Index is 68.8.
In addition, real wages dropped 2.4 percent over the past year, with inflation overwhelming pay hikes after several years of gains under President Trump.
In just one year, Biden has managed to torch an economy that was recovering robustly when he took office. One bad decision after another, compounded, to be sure, by certain events beyond his control, have scuttled the turnaround that was well underway the day he became president.
His major mistakes? Depressing oilfield investment, reversing U.S. oil output and leaving us at the mercy of OPEC and higher gasoline prices; stoking out-of-control federal spending with the Democrat-only American Rescue Plan (ARP), sidelining millions of workers and fueling an ongoing labor shortage; delivering mask mandates that have exacerbated that worker shortage; ignoring the resulting inflation until voters rebelled, demanding the Federal Reserve take what may be harsh measures to change course.
Those are just the high points.
Biden apologists will claim that 1) the omicron variant is to blame for our slowdown, 2) growth a year ago was fueled by federal spending boosted by COVID-19 relief bills and 3) on the positive side, we have significantly lower unemployment.
Those points are correct, but they do not excuse the hash Biden has made of the Trump recovery.
First, the omicron variant is certainly causing a slowdown in growth. But consider that a year ago, delta – a much deadlier form of COVID-19 – was raging, causing 4,380 deaths in the U.S. on Jan. 20, Biden’s inauguration day. Vaccines had just been introduced, people were scared and there were no known therapeutics.
Today, the seven-day average of deaths from COVID is running a little below 2,000. Omicron is dominant. Vaccines, which significantly lower the odds of serious illness and death, are widely available, while various therapeutics are emerging.
In other words, the threat from COVID has declined; why should omicron be a bigger problem for growth than the earlier delta variant? Could it be that the over-the-top mask and vaccine mandates and dire warnings of gloom from the Biden White House, faithfully rebroadcast by the media, have dampened America’s animal spirits?
Consider the course of consumer sentiment, which plunged in 2020 with the onset of the virus but had recovered much of its lost ground by the beginning of 2021 despite the ongoing challenges of the pandemic.
Under Biden, sentiment has slumped again, hitting levels recently not seen since the Great Recession. That is bad news; consumers need to feel optimistic to spend money. It is, of course, mainly consumer spending that drives our economy, and we recently felt the effects of that sentiment decline.
This past month, retail spending fell 1.9 percent, surprising economists looking for a 0.1 percent fall-off. Analysts attributed the decline to concerns about inflation. A year ago, in January 2021, retail spending jumped 5.3 percent, well above the 1.2 percent expectation.
As to the impact from federal relief bills, Congress passed a $900 billion aid bill in December 2020, in addition to the $2.2 trillion bipartisan CARES Act passed earlier, both of which propped up spending entering 2021. Millions of Americans received $600 relief checks in late 2020, and promptly spent them.
On the other hand, Democrats under Biden have kept the federal spigots wide open. In March 2021 they passed with no GOP votes the $1.9 trillion American Rescue Plan. Unlike the previous bills, however, the ARP was not primarily geared towards buoying spending or helping small businesses survive.
Instead, it directed hundreds of billions of dollars to Democratic supporters like the teacher unions and more hundreds of billions to bail out blue cities and states that had locked down their economies in response to the pandemic.
In addition, there was less urgency built into the ARP; the Congressional Budget Office estimated that some 40 percent of total outlays would go out between 2022 and 2030.
The only “rescue” underway was for moderate Democratic politicians about to be tossed by voters disgusted with the party’s far-left agenda.
Worse for the country, Democrats passed the ARP even as inflation had begun to rear its ugly head, and even as it was becoming clear that too many Americans were not returning to the work force. The ARP exacerbated these negative trends by extending unemployment and other benefits even as job openings soared.
Studies showed that millions of Americans were making more from the generous government payments than they would returning to their jobs.
Consequently, Joe Biden’s party oversaw the worst of all worlds: more federal spending thrown on top of a red-hot economy, driving up demand even as supply bottlenecks proliferated, labor shortages worsened and inflation took root. Republicans were correct to boycott the damaging Rescue Plan.
Joe Biden’s big claim to fame is the recovery in jobs during his first year. Of course, if you shut down businesses, tossing millions out of work, and then reopen them, the employment numbers will improve.
Actually, they had begun to improve when Joe took office; the January 2021 employment report showed a minor uptick in jobs. As the pace of reopening accelerated, so did employment.
To credit Biden with that inevitable turnaround seems idiotic, especially since almost three million fewer people are working today than when the virus hit in February 2020. But let him claim victory on that front; after all, it’s all he’s got.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.