"They say I'm smart, but I still can't see around corners," Burt Lancaster tells Tony Curtis in the 1957 motion picture Sweet Smell of Success. President Joe Biden has declared that his economic strategies of deficit-financed spending and government expansion are working. The Swamp creatures are once again abandoning reality and putting on rose-colored aviators, convincing themselves that spending money Washington does not possess will lead to eternal prosperity. It seems they cannot see 40-year high inflation and skyrocketing energy prices stampeding bystanders around the corner. The anointed individuals in the corridors of power are buying their own propaganda. As Lancaster famously uttered in the film, “I’d hate to take a bite out of you. You’re a cookie full of arsenic.”
In a single tweet, Biden espoused several half-truths. His primary claim was that 6.7 million jobs were created last year, the unemployment rate tumbled close to 4%, the economy grew 5.7% in 2021, and the federal deficit was slashed by $360 billion. Of course, he failed to mention his administration dropping the ball on inflation and leading to a critical energy calamity, resulting in soaring consumer and producer prices and crippling pain at the pump. So, let's address some of the claims in his tweet.
Jobs, Jobs, Jobs
Yes, it is true that 6.7 million jobs returned to the marketplace in 2021 after COVID lockdowns ended; they were not created. It is also correct that the jobless figure is at around 4%. But what is missing from the labor picture in today’s economy?
An average of 77.6% of Americans aged 25-54 were employed in 2021. This is down from 80% before the pandemic, meaning that there are still many Americans who are out of work. In fact, all but two states – Georgia and Montana – maintain employment rates that are below pre-pandemic levels. For example, in January, Illinois saw 8,600 jobs come back to the economy. But the state is still short more than 200,000 jobs that existed before COVID-19. The Land of Lincoln is also missing two times the amount of jobs as the rest of the country, spotlighting that the jurisdiction’s public policy measures are hurting the market. The labor force participation rate stood at 62.3%, still below the pre-crisis peak of 63.5%.
What about wage growth? Employers desperate for employees have been enhancing their compensation packages, from higher pay to a treasure trove of bonuses. But while average hourly earnings rose by 5.1% on an annualized basis, real wage growth has been about -2.4% in this inflationary environment. People are gradually heading back to work, but they are not earning more.
Indeed, the jobless rate keeps sliding. However, the roughly 4% figure is about double if you utilize U-6 unemployment data, which factors in short-term discouragement, part-time employees who cannot find full-time employment, or under-employed staffers.
GDP Euphoria
The gross domestic product highlighted that the U.S. economy has grown at the fastest pace since 1984. On the surface, this is accurate. The chief problem with the latest GDP numbers has been that they are misleading. For example, as Liberty Nation noted, most of the fourth-quarter growth was driven by inventory restocking during the holiday period. Fixed investment and net exports rounded out the remaining GDP gains, which were then slightly offset by a decline in net imports and public spending.
Early first-quarter estimates and broader 2022 forecasts suggest that the economy will not repeat this performance, with market analysts citing ballooning inflation, rising interest rates, and the global supply chain crisis. But even if it did emulate this performance, does it matter in the end? As LN wrote in 2018 when then-President Donald Trump was presiding over notable growth:
"Imagine this: an entrepreneur decides to build a ship. The boat is an exorbitant investment – lumber, fiberglass, aluminum, cement, et cetera – and is constructed to fish for salmon, provide tourists with impeccable scenery, or to transport cargo. Unfortunately, it doesn’t catch any salmon. It doesn’t carry any passengers or cargo. But it does achieve one thing: contribute to the nation’s gross domestic product (GDP)."
Biden the Fiscal Conservative?
Joe Biden (Photo by Alex Wong/Getty Images)
April Fool’s Day is on the horizon, but you will not be tricked into thinking that the president and the Democrats are suddenly stalwarts of fiscal conservativism because the budget deficit slipped. Biden did not cut the budget, trim the fat, or champion efficiencies. Instead, it was a case of two trends. The first is that most of the short-term emergency COVID-related programs expired and came off the books. The second was that the U.S. economy reopened, allowing people to work, spend, and borrow.
It is comparable to what economist Daniel J. Mitchell recently told LN: "If I make $50,000 a year, and then all of a sudden, 30 years after buying my house, I sell it and I have a capital gain, all of a sudden my income might jump from $50,000 to $150,000. Now, next year, guess what? My income goes back down to $50,000. The $150,000 isn't representative of anything other than, oh, I sold a house."
Cue the ‘Jaws’ Leitmotif
Why anyone would want to be president right now is befuddling. Inflation is showing no signs of slowing down, the national debt is only getting bigger, the stock market is experiencing a correction, geopolitical conflicts are intensifying, and the energy crisis is not abating. The United States has moved on from the coronavirus pandemic, but there is a barrage of sharks approaching shore, and Uncle Sam is going to need a bigger boat.
~ Read more from Andrew Moran.
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