The truth about Biden and America's economy
Sitting in the White House at a time when people are returning to their jobs following economic shutdowns is not the same as having policies that create new jobs
Former Chairman of the Council of Economic Advisers Kevin Hassett weighs in on the Labor Department's inflation report for February, noting that 'wages aren't keeping up with prices,' which means 'real incomes are going down.'
When it comes to the economy, if there’s one thing President Biden is good at, its taking credit for positive news that has nothing to do with his policies. February’s jobs and inflation numbers make the point.
To use the Bureau of Labor Statistics language, "employment rose by 678,000 in February." It’s wonderful to see people returning to work as pandemic fears and government benefits that encourage leisure both decline. But let’s be clear, this is primarily people returning to work, not massive new job creation as Biden claims.
FILE - President Joe Biden signs the American Rescue Plan, a coronavirus relief package, in the Oval Office of the White House, March 11, 2021, in Washington. (AP Newsroom)
If you work at a plant that employs 100 people and shuts down for weekends, those employees returning to work is not equivalent to the employer creating 100 new jobs every Monday. Similarly, sitting in the White House at a time when people are returning to their jobs following economic shutdowns is not the same as having policies that create new jobs.
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A state by state analysis clearly shows the impact returning to work has on the jobs numbers. Republican-led states, which have opened their economies more aggressively than Democrat-led states, are leading the jobs recovery. Through December, 16 of the top 20 states for jobs recovered since the pandemic began were led by Republican governors.
Frances Donald and Phil Blancato react to the upcoming CPI inflation report on 'Making Money.'
In reality, employment is still 2.1 million jobs short of its pre-pandemic level. So, expect this people returning to their jobs trend to continue.
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On a positive note, hourly wages were up 5.1% in February, which is a number for which Biden will claim credit. The problem is that this increase only means something if it exceeds the rate of inflation.
Unfortunately, as the chart below demonstrates, that has not been the case for nearly the entire Biden administration. With the annual inflation rate at 7.9% in February, a 40 year high, inflation is surging while wage growth has leveled around 5%, further driving real wages (the wages that matter) down.
In reality the rate of inflation has exceeded wage growth since last March (when Biden and the Democrats passed their massive $1.9 trillion spending spree). So, while the average number on workers’ paychecks (nominal wages) has increased each month, the value of those wages (real wages) has clearly and undeniably declined. Not really an economic positive.
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But what about all that record setting economic growth Biden keeps talking about. Shouldn’t that show up in the jobs numbers. Well, it turns out that’s not real either. GDP growth was 5.7% in 2021, but GDP growth is a year over year number.
FILE – WASHINGTON, DC - DECEMBER 27: President Joe Biden and the White House COVID-19 Response Team participate in a virtual call with the National Governors Association. (Kent Nishimura / Los Angeles Times via Getty Images / Getty Images)
If you’re rolling over a really bad year (maybe one with economic shutdowns for example) you should have a great year percentage wise. So rather than pandemic tainted 2020, let’s look at 2019 (pre-pandemic) compared to 2021.
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In 2019, GDP was about $19 trillion. In 2021, GDP was about $19.4 trillion. So, over the two year period from 2109 to 2021, GDP increased a mere 2% despite $5.3 trillion in pandemic related government spending. That’s not impressive. It’s depressing.
Circle Squared Alternative Investments founder Jeff Sica argues the market 'does not want to anticipate higher interest rates' with the backdrop of the the war between Russia and Ukraine.
With inflation surging, real wages declining, and GDP growing at a snail’s pace despite massive government spending, how much credit does Biden really deserve on the economy? About as much as his 38% Real Clear Politics average of the polls approval rating on the economy indicates he’s getting? Honestly, given the actual economic results, that number seems pretty high.
Andy Puzder was chief executive officer of CKE Restaurants for more than 16 years, following a career as an attorney. He is currently the executive chairman for 2ndVote Value Investments, Inc. and a Senior Fellow at both the Pepperdine University School of Public Policy and the America First Policy Institute. He was nominated by President Trump to serve as U.S. Labor Secretary.