MONEY MATTERS - Count, Joe, Count

Written by Drummond Pike

As the news shows breathlessly report on indictment after indictment of the former guy, and then with equal ferocity document his inevitably toxic reaction, buried on the business pages are documented evidence of a pretty remarkable economic recovery following the pandemic. Moreover, an unexpectedly resurgent labor movement is scoring some wins despite the decades long assault by the GOP at virtually all levels of government. FOX talking points, so prevalent just a few months ago that focused on rising gas prices and sky-high inflation, have been replaced by sarcastic denigrations of Biden for tripping over a sandbag on a stage or, even more frequently, the foibles of his son – truly a story without “legs” despite resolute efforts from leaders like Kentucky’s James Comer or Ohio’s “Coach” Jim Jordan. Both have promised but failed to deliver literally any evidence to support the idea that Joe was engaged in any of Hunter’s business dealings despite story after story about “$5-million-dollar bribes” and the like. It’s getting to be more and more like a political version of the Keystone Kops running in circles chasing their own tails.

At the same time, it is curious to most observers why Uncle Joe is so poorly regarded in his third year as President. His approval ratings seem to hover in the mid-40s on a good day, not much higher than his possibly felonious GOP competitor from 2020, who desperately wants a rematch in 2024. We can tick off a few things that Biden has done that in normal times would garner a few positives from his base: Bipartisan Infrastructure Act, the Inflation Reduction Act (with unprecedented funding for climate change mitigation), and the well-received CHIPS and Science Act to boost domestic production of silicon chips and circuits. Literally billions of federal dollars are flowing into critical parts of the economy to, as Biden frequently says, “build from the Middle out.” He’s even taken the risk to coin his own word for it all: Bidenomics. The term seems to have already gained far more acceptance than ridicule, though of course FOX has been having a field day trying to achieve the latter.

Even some of our erstwhile Democratic economists like Larry Summers who served in the Obama White House have been at best dour about Biden’s economic initiatives. Always a bit of mumbo jumbo, the field of economics has inexorably tied rising unemployment as a necessary component to fight inflation. But these are not normal times. While recovering from the pandemic created an extraordinarily high inflation rate of 8-9% - unheard of since the oil embargo of the late 70s – what it was going to take to tame it has been hotly debated. In the short run, it is clear that the response to the pandemic recession of infusing massive dollars to stimulate a recovery has caused inflation to spike. BUT will it continue? Larry Summers, former Treasury Secretary, has argued that to bring inflation down to the target of 2%, we’d need to accept an unemployment rate of 7.5% in order to, among other things, depress wages. A very conventional approach.

In contrast, Joseph Stiglitz argues that the rapidly increasing income gap means that there is a huge amount of money at the top end of the wealth and income pyramid that can, and should be taxed, to relieve the federal budget deficits, necessarily larger due the stimulus of the various infusions of federal money. And it would seem that Stiglitz is winning the argument.

The most recent reports suggest inflation has dropped down to the 3.5% range and is continuing on a downward trajectory. Paul Krugman of the NY Times suggests that we’ll probably get to around 3% by the end of the year. But this is happening while unemployment is nearing historical lows. The July DOL report showed it at 3.5%, a level that should result in rising inflation, except the opposite is happening. For economists, this is what they call “threading the needle” and is very hard to either achieve or explain at this point. But numbers are numbers, and Joe and his campaign should celebrate. How the GOP will respond to the success of this old codger is beyond me.

Even more startling is the apparent rise of labor, symbolized best by the recent settlement of the UPS – Teamsters negotiations. Had it gone to a strike, the effects on the economy would have been significant. Instead, the average driver is now scheduled to make $170,000/year as the new contract runs its course. I seem to recall something about “good-paying jobs” as central to Bidenomics. Not sure exactly how the “stumbler-in-chief” managed that one, but it’s going to be hard to run against. The question of course, is how Biden will overcome the “enthusiasm gap.” He’ll never match the former guy’s knack for insults and lies, but the numbers….are still the numbers.

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