The wonderful (horrible) economy (economic policy)
This made me laugh out loud:
Biden can’t catch a break. For the past year, Dems have been scheming to run against Trump, arguably the weakest candidate in US history. Now they are finally getting their wish, and Biden’s going to lose. (They don’t read my blog.)
Here are some truths about the current US economy:
1. It’s in very good shape (say between good and excellent.)
2. In the 1970s and 1980s, it was widely believed that it was impossible for the economy to be this good—to have such low inflation during a period of 3.7% unemployment.
3. The foreign media is almost universally drooling over how good the US is doing, and frequently compares the booming US economy to the weak economies of Europe and China. The economy is so strong that there is a huge surge of people desperately trying to get into the US. Is it any surprise that workers in countries paying $2/hour are attracted to a place where McDonalds pays $20/hour? Good luck with that wall Mr. Trump!!
Unfortunately for Biden, the people of the past don’t vote and foreigners don’t vote. Actual living Americans believe the economy sucks.
So am I sad that Biden is getting such bad luck? Not really. While the economy is good to excellent, his economic policies are fair to poor. (The poor part is his fiscal policy and his industrial/trade policies—the rest is fair.) Voters are right about Bidenomics, but for completely bogus reasons. Heck, most voters probably support his stupid policies.
And then there’s the bad karma from the Dems’ cynical attempt to pump up the Trumpian part of the GOP in the hope that it would be easier to defeat.
PS. I know, I know, it’s the high grocery store prices. And Trump’s going to fix that problem by . . . . checks notes . . . running massive budget deficits, an easy money policy, high tariffs on imported food and expelling all the illegal farm workers. As usual, Matt Yglesias nails it:
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4. March 2024 at 15:36
I largely agree with this post, but it does overlook the consequences of property zoning and very high housing costs.
Sky high housing costs may cancel out gains made by most of the employee class.
Biden may also lose on certain cultural matters, such as perceived weakness on crime or appointing a lesbian immigrant from Haiti to be The White House spokesperson.
Some voters, especially those among the one hundred and seventy million employees in the US, may take umbrage when Biden administration economists say that tight labor markets are a proble.
4. March 2024 at 15:49
PS I think Trump is a perfectly awful person.
4. March 2024 at 17:28
Aren’t voters just upset that the economy hasn’t quite done a soft landing?
After a big one time price jump (that not all wages kept up with) we are still hanging around 3% inflation with high interest rates.
This isn’t a weak economy, rather it’s overheated. But it’s not pleasant.
4. March 2024 at 17:36
If I had to guess about which party will have the closest to neoliberal policies today, it would not be the Republicans. Their voters are socialists that hate immigrants, whether they know it or not.
The US’s good fortune is that we still have enough of they lucky, successful companies that are driving most of the growth. Imagine where we would be if we didn’t bring tech immigrants in the Clinton and GWB years, and those companies were elsewhere.
Solon is right though that the housing policy of the entire Anglosphere is bananas. It’s very hard to try to make housing affordable and a good investment for the middle class at the same time. A lot of people have trouble affording rent, but I don’t see anyone in national politics with real policies. Subsidizing demand is just not the best.
4. March 2024 at 17:49
Bob, Good points. It probably makes sense to think of the GOP as a work in progress. Instead of trying to describe their current position, focus on the trajectory. They are going from a Reaganite party to a Victor Orban-style party. (Center left on economics, right wing on social issues, and very nationalistic/authoritarian.)
4. March 2024 at 20:02
Yes, the clouds seem to be darkening for those of us who want sane government, but there’s still some hope.
1. Democrats have won every election cycle after 2016.
2. Abortion is still an important issue and is poison for Republicans. This might be even more true with the effective banning of IVF in Alabama, and the masks coming off the Republicans who want to ban all birth control and even masturbation.
3. It’s hard to imagine Trump winning back the Republicans and right-leaning independents he was shown to have lost in 2020. These are the sorts voting for Nikki Haley.
4. Plenty of voters say a felony conviction would preclude them from voting for Trump. The hope of a conviction prior to the election is not all gone.
5. Trump is even crazier now than he was in 2016 or 2020. When more voters get a good look at him, he could lose support.
That’s not to say there aren’t cross-currents. Biden’s support among working class minorities has been slipping, for example. But, there’s a long way to go in this race. My sense is, if Biden loses, it’s because too many of his voters stay home. It’s a real danger, but I still think Trump will turn out more Biden votes than Trump votes.
5. March 2024 at 02:55
Scott,
given that monetary policy has been easy (as measured by NGDP) we can infer two things for certain:
a.) there must have been massive distributional effects (social fairness)
b.) the increase in y will subside/reverse once P catches up with MxV
Given a and b, it is not unreasonable for people to be worried, I would say.
I might also add that US fiscal policy is not only on an usustainable path, but also historically unprecedented (high deficit AND high growth) as per Eric Leeper:
https://macromusings.libsyn.com/eric-leeper-on-a-fiscal-account-of-covid-inflation
So there is another (rational) worry
5. March 2024 at 03:18
Who are you going to believe. Millions of people who cannot afford to buy food, or an economist who says “this is the best economy ever.”
It’s not!
Inflation is a lot higher than reported, because the basket of goods doesn’t reflect overall pricing.
Housing is unaffordable.
Additionally, you’re financing the growth by borrowing a trillion dollars every 100 days, and that 1 trillion of borrowing hasn’t produced much. What happens when the credit runs dry? What happens when you cannot afford the bill?
The $20 wage is nominal. Nominal wages mean nothing. What matters is purchasing power, and whether your town or city is a safe and comfortable place to live.
It’s arrogant to say that 50% of workers are wrong, and that everything is wonderful. The hubris is astounding.
And it’s not just a wall you low I.Q. imbecile. You’ve been told numerous times that the wall comes with high tech cameras, motion sensors, lights, all of which protect border agents from criminals crossing illegally. The border union has advocated for this equipment for a long, long time.
Texas has been adding razor wire, and the migrants have shifted to Arizona where it’s “easier”.
Lastly, for those who say a wall doesn’t work, why do you build a wall around the White House? Did the Great Wall not work? Were the Kings who built walls and moats around the castles, to protect their subjects, stupid?
None of that is dumb. What is dumb, however, is to allow tens of millions of people to walk across the border, when we cannot house them, feed them, and when the surplus of workers reduces the salaries for the middle class, makes communities unsafe, and makes housing unaffordable.
You’re like talking head for the multinational globalist, who is desperate for cheap labor. So desperate that they’re moving factories to Vietnam.
When the salaries in Vietnam rise, they’ll desperately look for the next low cost country.
It’s an unsustainable model.
5. March 2024 at 06:37
Sumner, familiarize yourself with my concept of “Bloomfield Hills Peronism”. Democrats have been attempting legislation such as the “Consumer Fuel Price Gouging Prevention Act” and the elite media seems to be very unenthusiastic with Milei (despite the fact he’s much more of an American puppet than the Peronists).
5. March 2024 at 06:47
“Millions of people who cannot afford to buy food”
See FRED graph ?g=1hSJn . Food expenditures as a percentage of PCE has been stagnant at ~8% since 2005. This is not Cuba’s “special period”.
“It’s arrogant to say that 50% of workers are wrong, and that everything is wonderful. The hubris is astounding.”
People’s personal opinion of their finances is quite favorable.
Sumner is not low IQ; I think he’s about five points higher than me. He’s very stubborn, though, for unclear reasons (I’d typically associate his neuroses with someone outside his background).
5. March 2024 at 09:33
You might be right that Democrats will lose this election. As I’ve said on other posts, I don’t blame Democrats for that as much as you do. I blame the people who actively want to live in a banana republic with National Guard troops rounding people up in US cities. Nobody can be surprised by what they get if Trump is elected again.
Maybe I’ve missed (or forgotten) what you think Democrats should have done differently. Younger candidate?
5. March 2024 at 09:35
Viennacapitalist,
“there must have been massive distributional effects (social fairness)”
Yes, incomes have rising faster among lower paid workers. But why would that make the public feel so negative?
As far as the fiscal time bomb, as you know I’ve been warning about that for years—ever since 2018. But worry about the future is different from saying the current economy is poor. In any case, the public knows little or nothing about the fiscal situation—they almost always think it’s bad.
5. March 2024 at 09:39
Acebojangles. You asked:
“Maybe I’ve missed (or forgotten) what you think Democrats should have done differently.”
There number one mistake was to become associated in the public’s mind with the excesses of wokism. Woke ideology has become just incredibly unpopular, and fairly or unfairly it’s associated with the Dems. Even I don’t think Trump is woke. (He’s racist, which is even worse.)
Yes, Biden is not particularly woke, but he’s not loudly anti-woke.
5. March 2024 at 09:49
“He’s racist, which is even worse.”
Again, Sumner, you have to get better at your criticisms of Trump. GOP presidential candidates have been called racist since at least Calvin Coolidge.
5. March 2024 at 10:09
It’s been a long time since we’ve had one of the two major parties in the US collapse. The last collapse was the Whigs in the 1850s. We had the conditions for a collapse in the mid-1900s but instead of collapsing, dissatisfied groups just migrated between the two parties. That was probably a warning sign that the barriers to entry for a political party had become too high.
Part of what we are seeing in the Trump phenomenon may simply be a reflection of this party creation stagnation. I believe that there are more and more people who feel politically homeless but are left to choose between the big government policies of the Democrats and the Know-Nothing policies of the Republicans because there’s nowhere else to go.
5. March 2024 at 10:20
ssumner,
I don’t see being associated with “wokism” as Democrats’ fault. I see that as a symptom of our terrible media climate. Why are Democrats associated with whatever wokism means while voters aren’t sure whether Republicans will ban abortion? I don’t see how Democrats can affect that. No matter what Biden says, ~40% of voters will believe that kids who identify as cats are using litter boxes in school and it’s the Democrats’ faults.
There’s a global shift toward right-wing authoritarianism. I think you’re underrating the causes and effects.
5. March 2024 at 11:20
Harding, The difference is that he actually is racist. I wasn’t calling Romney, McCain, etc., racist. And too anticipate a point I’ll make to Acebojanges, all those false accusations are one reason why Trump will win. The Dems cried wolf so often the public can’t even see a wolf when it arrives.
Carl, I agree.
Acebojangles, You are preaching to the converted. I’ve consistently argued that authoritarian nationalism is the world’s number one problem. The problem is not the hard core right–there aren’t enough of them. It’s that the woke idiots are pushing even centrists into the Trump camp.
You may think it’s unfair that university presidents and San Francisco politicians are viewed as Democrats, but that’s the world we live in. Biden may not believe that white people are oppressors or in defund the police, but he’s tainted by the Democratic label.
Don’t waste your time trying to convince me to vote for Biden, I already plan to do so. But there are not enough people like me.
Here’s an analogy. The people most to blame for San Francisco’s shoplifting epidemic are the shoplifters. But the SF politicians are also to blame. The people most to blame for the Trump phenomenon are the Trump voters. But the woke idiots are also to blame.
5. March 2024 at 12:14
Sumner, it would be helpful if you could point out some racist policies Trump implemented during his first term.
“Why are Democrats associated with whatever wokism means”
Biden-appointed Justice Jackson voted against race-neutral policies at Harvard.
5. March 2024 at 15:39
Sara,
The beauty of immigration is that we don’t have to feed and house them. The vast majority who are coming for productive jobs would be able to afford and feed themselves while producing goods and services for the rest of us.
My in-laws own a farm and have been operating at 25% staff since 2016 (not a coincidence). The staff they do get are working 100 hour weeks and still, large swaths of land are going unplanted. Ask a farmer: there is plenty of work to be done and we’d all be better off for it if we had enough people to do it.
Want to bring down food prices? Increased legal immigration with farm jobs and transportation lined up for them just like we used to do would be a sure-fire way to do it.
What’s dumb is not allowing people who want to do very necessary and unpleasant jobs for us to do so.
5. March 2024 at 16:22
Scott,
You replied, “The Dems cried wolf so often the public can’t even see a wolf when it arrives.”
While this is not entirely untrue, I thunk you’re way overstating the importance here. Let’s leave aside the issue of agency and responsibility all citizens have, and focus on the rise of such bigotry on a global level, as part of the broader rise of nationalism. Obviously, it wasn’t Democrats or American liberals who helped desensitize Hindus to bigotry against Muslims in India, or who fueled Islamic nationalism in Turkey, or anti-immigrant bigotry in Europe, to list just a few examples.
5. March 2024 at 23:43
Scott,
it is not that simple:
Yes (nominal) incomes have risen faster among the lower social strata, but the goods in their cosumption basket (rent!) have risen faster as well, i.e. i am not sure their PP has gone up more than those of the upper classes.
Ordinary people are also more likely to be negativelya affected by financing costs (credit cards, car leasing, etc.)
Apart from the fact that the upper classes in the US look at their net wealth, rather than income for their consumption decisions – and this has gone up massively with loose monetary policy. I even seems to be causing worker shortages as pre-retirements have spiked presumably due to high market value of pension plans.
My point: it still looks to me that the many have been disproportionaly negatively affected by loose monetary policy.
6. March 2024 at 08:31
The “trumpian” part of the GOP is the GOP.
The GOP has transformed from an elitist, warmonger party, led by Cheney, Bush, and McCain, to the party of decentralization, deregulation and liberty. It’s now the party of the working class.
Trump, Rand Paul, Rubio and Ted Cruz are now the leaders of the party.
Songbird McCain was the last of the GOP elitists (I voted for Obama). Romney ran in 2012, but he was a fraud and a phony. His healthcare plan in MA was atrocious. I again voted for the more authentic Obama, because Romney would have been a disaster.
This new movement is about removing warmongers and career politicians. And that has bipartisan support. Just give it a few years, and the left will look more like Bernie and AOC.
Bernie, of course, is a socialist. But even a socialist is better than the uniparty. At least, the man is authentic. At least he stands for something, and doesn’t just blow in the wind.
You’re on the way out. You can get used to it or keep crying on your blog. But ether way, your days are numbered. The babyboomer warmongers, along with the mainstream media, have been officially kicked to the curb. You’re too old, too out of touch, and too corrupt for our taste.
It’s a new era.
#decentralization
6. March 2024 at 11:15
Edward… liberty and decentralization? Is that why we replaced NAFTA with NAFTA (while claiming tariffs are a good thing), got in a trade war and had to provide subsidies to soy bean growers to not grow soy beans, decreased the number of immigrants, increased the federal budget, etc.
Where was the actual deregulation? Overturning Roe was a step in that direction but that hasn’t been well received (even though it should have been). All in all, I see a right that is much more into regulation and anti-free trade.
6. March 2024 at 12:07
Michael, The global angle is a valid point.
Viennacapitalist, You said:
“i am not sure their PP has gone up more than those of the upper classes.”
It has, the difference is far to great to be explained by differential inflation rates.
And worker shortages are not due to retirements, it’s excess demand. Total employment has risen very fast.
7. March 2024 at 07:35
ssumner,
I think we generally agree and I’m not trying to convince you to vote. I guess I’m having an academic discussion about the causes of public perception in our political system. You’re very close to getting it, but something causes you to insert blame for “woke idiots”.
What exactly are “woke idiots” doing? And which woke idiots? Some random local politician or school administrator may be a Democrat, but why is their behavior used to judge Democratic politicians generally?
The reason is that reactionary demagoguery is easy. It’s not that Democrats are doing something or not doing something. It’s that it’s easy to scare people about some vague cultural phenomenon and smear Democrats. And it’s even easier when those smears are spread on right wing media and social media to a public that views it as part of their identity to hate wokeness.
Even your use of the term “woke” is part of BS propaganda smear campaign. It’s a way to give reactionaries something to rail against, even if they can’t really define it.
Your shoplifting example is perfect. The question isn’t who to blame for shoplifting in SF, it’s why shoplifting in SF is such a big topic of conversation. There’s lots of reason to believe that there isn’t a surge in shoplifting in SF and SF has lower rates of shoplifting than NYC, Chicago, Seattle, and other cities.