U.S. household wealth has hit a historical record of $154.3 trillion.
CNN’s Matt Egan reported that “Americans have never been richer,” then asked the most common and least relevant question: “Despite improving economic conditions, But the public doesn’t give the White House their trust.”
Why doesn’t President Biden get more credit for the good economy?
For one thing, presidents don’t have as much influence over the economy as they pretend. On the other hand, U.S. economic conditions are actually not that rosy.
Indeed, America’s wealth is at an all-time high; In “name” – means not adjusted for inflation.
In fact, record wealth is largely the result of the damaging inflation of the past few years.
As the purchasing power of the dollar collapses at the grocery store or gas station, the prices of stocks, homes, and other investment assets rise.
Therefore, “record wealth” is mainly a product of asset price inflation rather than strong economic growth – real GDP growth has averaged only 1.33% annually over the past year and a half.
Think of it this way: If your freezer is full of hamburger meat, it was worth $4 a pound on Biden’s inauguration day and $5 a pound today — which, on paper, is 25 % gain, but you don’t feel richer: you still have the same refrigerator full of burgers, it’s just that it will cost more to replace it.
Americans’ “real” (i.e., inflation-adjusted) incomes are taking a hit because of persistent inflation.
According to data just released by the Census Bureau, Americans’ after-tax household income fell 8.8% last year, the worst decline in more than a decade.
And then there’s credit card debt — which hit a record $1 trillion last month.
This is why Americans are unhappy with the state of the economy.
The growth in paper wealth has been enjoyed primarily by the relatively wealthy, those with large investment portfolios and lots of expensive real estate.
The people most affected by inflation are those with relatively low incomes, who are more likely to rent (they won’t buy a home with a mortgage rate of 7.56%) and spend their paychecks on items most vulnerable to sharp inflation , such as food and gasoline.
Inflation in this category can be self-reinforcing in particularly damaging ways: Grocery prices rise not just because of rising food prices in general, but also because of rising diesel prices and commercial warehouse rents (which have been rising rapidly and are expected to continue to rise ). climbing this year) has increased costs across the retail grocery chain.
New Yorkers without cars still pay high gas prices every time they order from Amazon.
Americans have a strange habit of blaming or crediting the man in the Oval Office for economic developments far beyond his control.
Take the Clinton administration, for example: the economy did very well in those years, thanks in part to policies adopted by previous administrations (especially the tax and regulatory reforms of the Reagan era), but mostly due to the spread of personal computers and the emergence of the Internet as an economic engine , neither of which Clinton controls.
The Biden administration, and the Trump administration before it, contributed to the current economic situation by spending furiously on “emergency” priorities long after the pandemic became a national crisis.
Federal spending will account for 25% of GDP in 2022 and is expected to approach that number in 2023.
That number is higher than it has been since 1946, when the United States was still winding down its military mobilization for World War II.
Inflation occurs when you inject large amounts of money into the economy.
Some wealthy people may be perfectly happy with inflation when it manifests itself in rising prices for the assets they own, but many less wealthy people suffer when inflation affects the things they need.
Joe Biden did not create the coronavirus or disrupt supply chains, but he argued that continued high spending levels have led to continued high inflation.
The president should probably think twice about how much credit he really wants to extend to this economy.
Kevin D. Williamson is a national correspondent for The Wire and a writer-in-residence at the Competitive Enterprise Institute.