Bidenomics Caused Recovery

Financial FAQs

“Real gross domestic product (GDP) increased at an annual rate of 3.1 percent in the third quarter of 2024, according to the "third" estimate. In the second quarter, real GDP increased 3.0 percent. The increase in the third quarter primarily reflected increases in consumer spending, exports, business investment, and federal government spending.”

BEA.gov

It might not seem fair to compare the Biden and Trump administrations, economically. The Biden administration will have created almost 16 million payroll jobs in four years, whereas Trump had created 6.7 million jobs until the 2000 pandemic, but lost -2.7 million jobs overall during his term because of its severity.

Though COVID-19 was made worse by Trump’s misinformation campaign that cast doubt on many of the actions needed to limit its damage, such as wearing masks in crowds and advocating chlorine injections.

But the increase in the 3^rd (and final) revision to third quarter economic growth when many thought a recession was immanent this year gives testament to the strength of the economic recovery under President Biden. The U.S. economy has now expanded by at least 3% in each of the past two quarters. What’s more, the most recent estimates suggest GDP will top 3% in the fourth quarter, as well.

The result has been surging growth and full employment with declining inflation, refuting the misinformation barrage that elected Trump for a second term. The Fed’s preferred Personal Consumption Expenditure (PCE) inflation measure even came in below expectations, up just 0.1 percent in November, 2.4% annually.

FREDpce

But it still hasn’t answered the question of many voters:Why haven’t prices come down for the things that consumers use daily?

The simplest answer is that most consumers are flush with rising wages and leftover savings that have boosted retail sales and leisure activities. The big driver of economic growth has been consumer spending. Household spending increased to a 3.7% annual pace in the third quarter, from 3.5%. Prices would come down if consumers wanted to spend less—maybe because they had lost confidence in future growth and feared for their jobs October

But that hasn’t been the case. Consumer confidence surveys, such as by the Conference Board, are showing they aren’t that worried or unhappy about their jobs.

“Consumer confidence continued to improve in November and reached the top of the range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “November’s increase was mainly driven by more positive consumer assessments of the present situation, particularly regarding the labor market.”

Another index by the Conference Board, it’s Index of leading Economic Indicator (LEI) that attempts to predict future growth has also turned positive. It rose for the first time since February 2022.

“A rebound in building permits, continued support from equities, improvement in average hours worked in manufacturing, and fewer initial unemployment claims boosted the LEI in November,” said Senior Manager Justyna Zabinska-La Monica.

Even Fed Chairman Powell is now saying they might have fewer rate cuts next year if such strong growth continues.

And that will hurt the anemic housing market, which just last Thursday announced the largest rise in existing-home sales in a year, all because of a slight (and temporary?) drop in mortgage rates.

The National Association of Realtors announced that total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – improved 4.8% from October to a seasonally adjusted annual rate of 4.15 million in November. Year-over-year, sales bounced 6.1% (up from 3.91 million in November 2023).

“Home sales momentum is building,” said NAR Chief Economist Lawrence Yun. “More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6% and 7%.”

So even the housing market is telling us that Bidenomics has been a success. And Republicans will now be taking credit for it over the next four years, so I think they won’t dare cut those programs in the name of greater efficiency that have made President Biden’s investments in future growth so successful.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Was Inflation the Problem?

 Popular Economics Weekly

“The West Wing may believe Bidenomics is working because the macroeconomic gurus at the Federal Reserve are telling the White House it’s working. But Bidenomics has failed to create sufficient tangible improvement in the lives of most voters in a world in which groceries still cost more than they did a year ago, average rent and mortgage rates have spiked and health and child care grow ever more unaffordable. Mr. Biden cannot win in 2024 unless he speaks to the economy as it is, not as he wishes it was,”Karen Petrou, NYTimes.

FREDcpi

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent on a seasonally adjusted basis in November, after rising 0.2 percent in each of the previous 4 months, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.7 percent before seasonal adjustment.

As shown in the FRED cpi graph dating from 2000, the last inflation surge began in 2020 during the Biden administration and the COVID-19 pandemic. A majority of voters in the presidential election decided prices and inflation had been too high for too long, therefore President Biden was blamed for it.

But no, it was the pandemic’s sudden supply shortages that caused the surge, not Biden’s Bidenomics’ legislation that enabled the quickest recovery in the developed world. Yet it took 3.5 years for inflation to return to today’s 2.7 percent annual rate, still above the Fed’s 2 percent target goal.

There was another reason for the anger over such high and prolonged inflation. The incomes of half of U.S. households could not keep up with the inflation surge. Most of the increase in household income was achieved in the period from 1970 to 2000. In these three decades, the median income increased by 41%, to $70,800, at an annual average rate of 1.2%, says PEW Research.

The warning shot about the discontent of American workers was written in 2023 by Karen Petrou, a NYTimes guest columnist, in which she said that “ 64 percent of households live paycheck to paycheck from time to time, according to a March consumer survey. These families are barely making it through the week, let alone accumulating the wealth essential for financial resilience and, over time, financial security.’

Why such an increase in income inequality? A series of recessions (gray bars in the FRED graph) occurred during tempestuous times—the Gulf War, the various wars on terror in Iraq and Afghanistan, the Great Recession, and busted housing bubble.

The median household income in 2015 – $70,200 – was no higher than its level in 2000, marking a 15-year period of stagnation, an episode of unprecedented duration in the past five decades.

The unemployment rate rose from 4.2 percent to 5.7 percent during the shorter-lived 2001 recession (and 9/11 Twin-towers attack). It rose from 5 percent to 10 percent during the Great Recession that ended in 2009. And those in the lower ‘income brackets suffered the most financial damage, as is always the case.

And the reason for those recessions was in large part because “it is like a poker game where the chips have become concentrated in fewer and fewer hands,” again quoting Roosevelt’s Federal Reserve Chairman at the time.

Ms. Petrou concluded, “Listening to advisers — not voters — is a fatal campaign error, one that Hillary Clinton made in 2016. Mr. Biden only narrowly pulled out a win in 2020 because Mr. Trump wasn’t listening to voters when it came to Covid. Now they’re tuned in to Mr. Trump’s perspective on the economy because he is, in his way, listening to them.”

The irony is that it is just those Bidenomics’ programs that are funding factories in many of the red states that can help to ease the inequality that has affected so many working folk, and that is the source of most of the discontent.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Another Gilded Age?

 Financial FAQs

"I remember '29 very well ... the drugged and happy faces of people who built paper fortunes on stocks they couldn't possibly have paid for. ... In our little town bank presidents and track workers rushed to pay phones to call brokers. Everyone was a broker, more or less. At lunch hour, store clerks and stenographers munched sandwiches while they watched stock boards and calculated their pyramiding fortunes. Their eyes had the look you see around a roulette wheel ...but despondency, not prosperity was just around the corner.”—John Steinbeck

Graph: Last Tech Age

This is what happened in the 1920s that led to the Great Depression and Roosevelt’s New Deal.

Marriner Eccles, Rooselvelt’s New Deal Federal Reserve Chairman was one of the first to characterize the cause of the Great Depression, when he said in testimony before congress that it was the record income inequality of that time:

“The United States economy is like a poker game where the chips have become concentrated in fewer and fewer hands, and where the other fellows can stay in the game only by borrowing. When their credit runs out the game will stop—Mariner Eccles, Federal Reserve Chairman during the Great Depression.”

The current Gilded Age began in earnest with the election of President Ronald Reagan and his credo that “government is the problem.” It has resulted in the huge transfer of wealth from workers to the owners of capital—as much as $1trillion, according to some economists—by cutting their taxes and deregulation of whole industries.

Laws were also enacted to weaken labor unions and monoply laws were not enforced so that corporations could transfer their factories overseas where labor was cheaper, basically gutting America’s middle class industrial base that has been the cause of so much anger and despair of America’s workers.

The U.S. is in 106th place of the 149 countries in income inequality as ranked by the CIA’s World Factbook; with a Gini inequality index of developing countries like Peru and Cameroon. Whereas Finland and the Scandinavian countries are at the top of equality rankings, Germany and France are 12th and 20th, respectively, as I’ve highlighted in past columns. The higher the index, the greater the gap between wealthy and poorer citizens of a country’s population.

It’s had to believe that we have reached that point once again, a time when today’s wealthiest exceed the wealth of the Vanderbilt’s, Rockefeller’s and Morgan’s tenfold that built those massive 5^th Avenue mansions at the turn of the 20^th Century to show off their wealth, before there was an income tax or Federal Reserve.

It was spawned by an economy fueled by oil, railroads, and a banking system that enabled so many consumers to go into debt, until the stock market crashed on Black Friday of 1929.

History is repeating itself with $Trillioners instead of the $Billionaires (and $Millionaires) of that era because of Sillicon Valley and the Internet that have made an Elon Musk, now the richest person in the world.

But it is at the cost of a greater concentration of wealth than ever. Today’s moguls duplicate the 20^th Century robber barons in wanting to share as little of their wealth as possible—instead, they use their wealth to elect conservative policies that lower tax rates and cut government benefits that protect the other 99 percent of Americans.

Is President Biden’s Bidenomics’s spending of $trillions to modernize America’s industrial base, infrastructure, and mitigate disasters caused by a changing climate the last gasp of Roosevelt’s New Deal programs that protect ordinary Americans?

The incoming Trump administration has tasked the richest man in the world to set up a “Department of Government Efficiency”, they say, to downsize or eliminate some of those programs to eliminate waste, but really to shrink or eliminate the health and safety programs; such as the US Environmental Protection Agency, Health and Education department, and even shrink the IRS once again to enable the $Trillionaires to better evade taxes.

Trump is clear about his intentions. He intends to pick a cabinet based on their loyalty to him as he did in his first term. Many have no qualifications; most were lobbyists with blatant conflicts of interest which resulted in many having to resign when their corruption was uncovered.

Such dysfunctional behavoir was a reason President Trump lost the House of Represetatives to Nancy Pelosi and the Democrats in 2018, and Trump lost to President Biden in 2020.

Sadly, the incoming all-Republican congress will probably give him the tax cuts, inflationary tariffs and the mass deportation of undocumented immigrants that will also be a repeat of Trump’s first term.

And many in the working class who voted for him will suffer again, and as they have throughout Trump’s working life; thanks in large part to the Elon Musk’s of the world that don’t believe in sharing their wealth.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Job Market Still Booming

 Popular Economics Weekly

Total nonfarm payroll employment rose by 227,000 in November, and the unemployment rate changed little at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment trended up in health care, leisure and hospitality, government, and social assistance. Retail trade lost jobs.

FREDunemploymentrate

It looks like the American economy that so many voters thought was not working for them has now brought the unemployment rate down to 4.2 percent from its 14.8 percent high in April 2020 (peak of red line in graph) during the COVID-19 pandemic.

This is despite the labor strikes by Boeing employees, East Coast dockworkers, railroad workers and several hurricanes that devastated parts of the south.

President Biden touted the results in the next to last unemployment report of his administration. It took much longer to get there after the Great Recession (large gray bar) in the FRED graph dating from 2010 that included the Obama and first Trump administrations.

"America’s comeback continues," he said in a statement. "Today’s report shows that the economy created 227,000 jobs in November, as Boeing machinists returned to work with record wage gains and hurricane recovery continued. Unemployment of 4.2% is in the same low range of the past seven months. This has been a hard-fought recovery, but we are making progress for working families."

Hurricanes Milton and Helene prevented more than a half million people from going to work in October, said MarketWatch’s Jeffry Bartash, but most of them were back on the job last month. The number of people who said they could not work because of bad weather in November fell to just 62,000 from 512,000 in the prior month.

Almost all sectors showed job increases: Education/Health +79,000, Leisure/hospitality +53,000, Government +33,000, and manufacturing + 22,000 in payroll jobs.

This could not have happened without the various policies enacted over the past four years of the Biden Administration when more than 15 million jobs were created that brought the American economy out of the COVID-19 pandemic, the worst natural disaster in more than 100 years.

The truth is that it could have been much worse if the pandemic recovery hadn’t been a public/private collaboration. The $5 trillion in the various Bidenomics’ legislation enacted by a bipartisan congress put those investments into productive enterprises, such as modernizing our infrastructure and manufacturing base, as well as mitigating the results of global warming by investing in alternative energies like solar, EVs and wind generation.

Many Americans have suffered horrendously from the hurricanes and record number of tornadoes that have devastated parts of the south and Midwest. Climate change has not proven to be a ‘hoax’, so I am hopeful that the upcoming Republican administration in their drive for more efficiency will not eliminate those programs that have helped these regions to recover. Many of the worst-hit areas are in Republican-run red states.

All eyes are now riveted on whether the Federal Reserve will drop interest rates another 0.25 percent in its December FOMC meeting, which will boost growth further.

Prominent economist Mohamed El-Erian has described today's jobs release as "a somewhat strong report, but not consistently strong," adding that it should pave the way for an interest-rate cut by the Federal Reserve later this month.

"It is strong on the earnings side. It is strong on the labor participation coming down side -- less supply -- and is also strong on a small beat," he told Bloomberg TV. "But the fact that the unemployment rate went up means that the Fed will be comfortable cutting by 25 basis points, means that the market will increase the probability of this happening. So on the policy front, this did not complicate what would have been a messy situation."

I am also hopeful after COVID-19 that the next administration will know enough not to cut too much meat off the government’s bone that’s managing our healthcare system when another natural disaster might loom, such as a bird-flu pandemic that scientists are now saying is a possibility.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Inflation Not the Problem

 Financial FAQs

Inflation is close to its long-term 2 percent range, so the Federal Reserve has accomplished its goal of stabilizing prices. Yet the election results show that rising prices since the COVID-19 pandemic most panicked voters; even more than the border crossings, or abortion restrictions, and jobs.

Reuters

So it’s difficult to say whether voters ignored basic economic principles, or ideologies triumphed common sense, so that many voters needed to blame someone for their anxieties and wanted to “throw out the bums” they believed caused it.

It is how democracies work. This reaction happened in most of the developed world where ruling majorities were blamed for the effects of the pandemic that damaged their economies.

But in the U.S. it was too much prosperity, not too little. The Bidenomics’ bills pumped an enormous amount of investments into our economy to build a larger industrial base, modernize our infrastructure and moderate the global warming.

And many voters didn’t seem to understand how it affected the most basic law of economics: the Law of Supply and Demand. It postulates that prices rise when there isn’t enough of something consumers want, and they fall when there is a surplus.

Only now has the supply of goods and services caught up with demand, which is why consumers continued to buy as prices rose, because the U.S. economy is fully employed and consumers weren’t worried about losing their jobs. The historically low number of workers applying for jobless benefits confirms this.

Yet voters were still unhappy. Everyone had a job that wanted one, yet wages for many weren’t rising as fast as the cost of everything since the pandemic.

Why? Because it took several years for the supply chains to recover, which meant the Federal Reserve had to raise interest rates to stabilize prices, making things even more expensive.

What can’t happen, however is for most prices to return to levels before the pandemic unless there is another recession—except for energy prices (gas, natural gas, electricity) because they can fluctuate wildly even in normal times. So energy prices have returned to more normal levels. Average gas prices, for instance, have returned to pre-pandemic levels.

Consumer prices rose enough in October to keep the rate of inflation slightly above the Federal Reserve’s 2 percent goal, The consumer price index (CPI) climbed 0.2 percent for the fourth month in a row, the government said Wednesday, matching economists’ forecast. It rose 2.6 percent in a year from September’s 2.4 percent inflation rate, marking the first upturn in seven months.

This could be problem, especially if some Republican priorities are enacted, such a more tax cuts, which might cause the Fed to hold off cutting interest rates further. It would probably hurt both stock and bond prices, for starters, and slow growth further in what is already a slowing economy.

On a more cheerful note, now that prices stabilized, the natural rise of wages will catch up with those newly stabilized prices and most of us will feel reassured—unless there’s another economic shock.

That could be a larger war, or a climate disaster. Americans are already experiencing a greater frequency of such shocks with more tornadoes, hurricanes, wildfires and floods. So newly elected congress men and women, please, please, don’t cut the funding of the Environmental Protection Agency, or FEMA!

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Harris Presidency

 ANSWERING KENNEDY’S CALL

What would it mean for Kamala Harris to be our first female President? It’s a historical turning point that affirms women have finally attained equal political rights to men, and American citizens s confirm they want greater personal rights—to expanded health care, abortion, and environment protection that has been held back by a dominant male culture until now.

Should Harris and the Democrats win it would also signal the end of the Second Gilded Age, an age characterized by record income inequality that began in earnest when President Ronald Reagan’s supply-side economic policies began to transfer massive amounts of wealth from working adults (small business and salaried) to the owners of wealth (capital assets) in the 1980s.

cbpp.org

It would give President-Elect Harris a mandate to begin to reverse the tax structures that were the major cause of the record inequality by raising corporate and personal tax rates back to Reagan-era levels, and thus begin to reduce the massive budget deficits that resulted.

President Reagan and Republicans cut the maximum personal tax rate for the wealthiest from 50 percent to 28 percent and reduced corporate taxes from 34 to 28 percent to initiate what economists call the Second Gilded Age, which resulted in our first massive deficit--$400 billion—by the end of his administration.

The massive deficits continued to grow under successive Republican administration tax cuts that resulted in curtailing our social safety net. GW Bush’s deficit grew to $1 trillion, and the Trump administration’s to more than $5 trillion.

A Harris Presidency could also mean an end to our ongoing civil war, a war originally between the industrial North vs. slave-holding South that never really ended with General Lee’s surrender at the Appomattox Courthouse in 1865.

Though slave-owning was banned with the Emancipation Proclamation and Abraham Lincoln’s north winning the civil war, southern states found ways to continue to impoverish former slaves by terrorizing them under Jim Crow laws that even the civil rights acts of the 1960s couldn’t completely eradicate.

Today’s manifestation of our civil war has morphed into a battle between red states controlled by Republicans with a white male/Oligarchic culture continuing to impoverish their own citizens vs. more prosperous blue states with a dominant female/minority majority.

Kamala Harris has promised in her platform and speeches that she would be a President for all Americans. That would mean policies benefiting red state citizens as well, such as raising the federal minimum wage from $7.25 that was last raised in 2009.

Currently 14 states haven’t raised their minimum wage since then, or at all. Five red states have not even adopted a state minimum wage: Alabama, Louisiana, Mississippi, South Carolina and Tennessee. Two states, Georgia and Wyoming, have a minimum wage below $7.25 per hour, so that in all seven of these states, the federal minimum wage guarantees at least a $7.25 per hour wage. New Hampshire and Pennsylvania are the only blue states still with the federal minimum wage.

There are other ways the red states have kept workers’ salaries lower that Harris should remedy: lobby to repeal so-called right-to-work laws in 26 states that say members of a union aren’t required to pay union dues even though they enjoy the benefits. The result is that membership in unions has declined, along with workers’ rights to bargain collectively. And those 26 states now have a Supreme Court majority to enforce those state laws.

Democratic majorities have always found ways to benefit more Americans since the New Deal. President Obama was able to pass Obamacare, or the Affordable Care Act, the first universal health insurance that meant insurance companies couldn’t ban clients with existing conditions.

Climate change has become a clear and present danger causing more hurricanes, floods, wildfires threatening Americans that Donald Trump has called a hoax, and would rather “Drill baby drill” for more fossil fuels.

The Biden administration has already begun work on reducing global warming with the Inflation Reduction Act subsidizing alternative energy sources that don’t increase global warming but that the Republican Party vociferously opposes to protect its fossil fuel constituents.

We have lived through a Gilded Age before. The first Gilded Age came in the late 1800s, when the Industrial Revolution made Robber Barons such as railroad titan Cornelius Vanderbilt, banking titan JP Morgan, and Standard Oil’s John D Rockefeller the richest men in their time.

It ended with the death of President William McKinley in 1901, and revelations of rampant corruption followed by Teddy Roosevelt’s Progressive Party and Franklin Roosevelt’s New Deal that created government institutions such as the Federal Reserve to regulate banking and social security, as well as empowering labor unions to level the playing field for workers.

If elected, Kamala Harris and Democrats should be able to continue the new New Deal legislation that President Biden’s Bidenomics’ policies have initiated with more than $5 trillion invested in keeping America great and creating 16 million jobs that have benefited all of our citizens, not just Oligarchs such an Elon Musk.

Musk warned, after all, what would happen if he became the efficiency czar Trump says he wants him to be and cuts $2 trillion from the $6.75 trillion federal budget. There would be no money left for social programs, the military, and drastic cuts in social security and Medicare benefits, say economists such as Nobel Laureate Paul Krugman.

It would also mean Husband Doug Emhoff would become the first, First Gentleman, which wouldn’t diminish the historical record of great First Ladies. Men should take heart that women have equaled men in all ways, not just in intelligence and courage, but have shown a heart large enough to create a United States, not a Divided States of America, when Kamala Harris becomes our new President.

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Does Bidenomics Work?

 Financial FAQs

FREDrealgdp

Elon Musk told a cheering crowd at Sunday’s MAGA rally in New York that if Donald Trump puts him in charge of government efficiency, as planned, he can cut “at least $2 trillion” from the current federal budget.

This would cause an almost immediate recession. Such is the blindness of the world’s richest Oligarch, who has made no bones about his dislike of government regulations and taxes in the way of his dream of reaching Mars.

MarketWatch’s Brent Arends tells us what would happen. “Either Donald Trump and Elon Musk are planning to cut 85% of all spending on highways, disaster relief, federal bank-deposit insurance and the departments of Agriculture, Homeland Security and Justice; close all U.S. embassies; and abolish the Environmental Protection Agency, the Small Business Administration, NASA and nearly all welfare, income-support, food-stamp and childhood-nutrition programs.”

“Or, they are planning on cutting Social Security and Medicare — despite Donald Trump’s protests to the contrary,” said Arends

That is what is behind Republicans’ dislike of Democrats economic policies since President Biden’s election that has created more than 15 million jobs and 3 percent economic growth as we recovered from the COVID-19 pandemic.

It takes government investments to spur private investments; not just in new technologies (the CHIPS Act) but healthcare and the environment (Inflation Reduction Act), and in modernizing our infrastructure (Infrastructure Act) so that Americans will feel more secure from hurricanes and illness and therefore produce more.

That is the real definition of efficiency, not cutting benefits so that Billionaires can keep more of their wealth.

President Obama was the first to turn the tide on President Reagan’s 40- years of trickle-down economic policies after the Great Recession (2008-09) that had transferred $50 trillion in wealth from working Americans to the owners of capital living off their corporate profits, according to a RAND Corporation working paper.

He did it by creating Obamacare (the Affordable Care Act) and making government the protector of people, not of profits, as President Reagan had done. This resulted in economic growth accelerating to 4 percent during the Obama years continuing into Trump’s years, even with a Republican-engineered shutdown. It was the longest economic recovery since World War Two, and the reason Trump could brag that growth has been so good just prior to COVID-19.

The economy unfortunately shrank -7.5 percent in 2020 as businesses shut down due to the pandemic. It roared back to life in the second quarter of 2021 as congress acted quickly to put money back into Americans’ pockets.

In fact, the U.S. economy will continue to provide most of the thrust for global growth through the balance of this year and in 2025, led by robust consumer spending “that has held up through a wrenching bout of inflation and the high interest rates used to tame it,” the International Monetary Fund said on Tuesday.

Such economic policies requiring government investments have worked before. It was Roosevelt’s New Deal that employed more than 8 million people, built 650,00 miles of roads, 120,000 bridges, created the minimum age, 8-hour workdays and started up social security.

Now more than half of the living US recipients of the Nobel Prize for economics signed a letter that called Vice President Kamala Harris’ economic agenda “vastly superior” to the plans laid out by former President Donald Trump.

“While each of us has different views on the particulars of various economic policies, we believe that, overall, Harris’ economic agenda will improve our nation’s health, investment, sustainability, resilience, employment opportunities, and fairness and be vastly superior to the counterproductive economic agenda of Donald Trump,” the economists write in the letter obtained by CNN.

Top this off consumers are now joining the Harris economic bandwagon. The Conference Board’s latest consumer confidence survey surged to 108.7 in October from a revised 99.2 reading in the prior month,the Conference Board said Tuesday.  This is highest level of confidence since January.

“Consumer confidence recorded the strongest monthly gain since March 2021, but still did not break free of the narrow range that has prevailed over the past two years,” said Dana M. Peterson, Chief Economist at The Conference Board. “In October’s reading, all five components of the Index improved. Consumers’ assessments of current business conditions turned positive. Views on the current availability of jobs rebounded after several months of weakness, potentially reflecting better labor market data.” 

Is Bidenomics finally catching on with ordinary Americans, not just economists?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Bidenomics Is Working!

 Financial FAQs

Brad Delong

Why are Republicans denigrating Biodenomics, the economic policies passed by a bipartisan congress since 2021 that is causing 3 percent GDP growth and 4.0 percent unemployment, with 8 million job vacancies looking for workers, and inflation back to COVID-19 pre-pandemic levels?

Republicans are playing politics in this election year, of course, but Senator McConnell has touted President Biden for rebuilding some major bridges in Kentucky with the Infrastructure Act.

In fact, the U.S. has far outdistanced other developed countries in recovering from the COVID-19. Why? Because President Biden has pulled off a great renaissance of public-private investments with said bipartisan congress, the largest investments in renewing the U.S. economy since Roosevelt pulled off the New Deal during the Great Depression..

Time Magazine described what it is meant to do: “Bidenomics argues that a large and thriving middle class is the primary cause of economic growth. “When the middle class does well, everybody does well,” the President has repeatedly explained. This is the core proposition of Bidenomics: that prosperity grows from the bottom up and the middle out.”

Vice President Harris has echoed that slogan in her campaign, because very few Americans seem to understand Bidenomics at all. A major reason is that four decades of its predecessor; Reaganomics, or Trickle-down economic policies; have badly damaged the middle class, followed by the double-whammy of COVID-19,

A Monmouth University Poll finds that just under half the public gives President Joe Biden credit for this upturn, for instance, but few say his policies are helping the middle class, especially compared to his predecessor.

“The president has been touting ‘Bidenomics,’ but the needle of public opinion has not really moved. Americans are just not giving him a lot of credit when it comes to the economy,” said Patrick Murray, director of the independent Monmouth University Polling Institute.

The poll also finds that disapproval of Congress has hit a nominal record for the past decade.

Time Magazine cites a major reason for the pessimism in a new working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation—the record inequality of the past four decades:

“…had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. “

The authors assert that since the 1970s, some $50 trillion in wealth has been transferred from workers to owners of capital with the massive deregulation of whole industries, including banking, the passing of anti-labor legislation that weakened union collective bargaining, and massive tax cuts for the wealthiest that practically halved the maximum income tax rate from 50 percent in 1980 to 28 percent today.

So, it is no wonder that workers in the Rust Belt Midwest want to return to the ‘good old days’ of post WWII, when income distribution was more equal (but with fewer Black and women’s rights)?

The problem is that has never been Republicans’ agenda, especially MAGA Republicans, still the party of the wealthy attempting to sell their credo that lower taxes and fewer government benefits will benefit all Americans.

Europeans love Bidenomics, however. “With a fast-growing economy, a strong labour market and falling inflation, the US has outpaced its counterparts in Europe and elsewhere, says a recent BBC article. That put the US at 2.5% over the course of the year, outpacing all other advanced economies and on track to do so again in 2024.”

What will it take for Americans to know and value what we have?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Full Speed Growth Ahead--Part II

 Popular Economics Weekly

The September Consumer Price Index (CPI) continued to decline, further evidence that the inflation battle has been won. All eyes are now on whether strong economic growth can continue with the labor market beginning to falter, which the Fed has said is a primary concern.

An early sign of labor weakness is that the weekly initial claims for unemployment has risen. The number of Americans who applied for unemployment benefits surged by 33,000 to 258,000 in the week that ended Oct. 5, the Labor Department said on Thursday. This is the highest level of initial claims since early August 2023.

Some of the increase may be due to one-off events like the Boeing strike and hurricanes ravaging the east coast. But that’s another reason the Fed should continue to cut interest rates for consumers that are facing uncertain futures, whether it’s more frequent natural disasters as our planet continues to warm, or future labor unrest.

FREDcpi

“In September, the Consumer Price Index for All Urban Consumers rose 0.2 percent, seasonally adjusted, and rose 2.4 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.3 percent in September (SA); up 3.3 percent over the year (NSA),” said the Bureau of Labor Statistics.

Up just 2.4 percent in a year, retail inflation has reached the Fed’s target rate, for all intents and purposes. Continuing to hold interest rates too high for too long could precipitate more job losses.

NY Fed President John Williams said recently that it was now time to help the labor market.

“The FOMC “instituted and maintained a very restrictive monetary policy stance until the data gave us confidence that inflation is sustainably on course to 2 percent,” President Williams said. “With this progress toward achieving price stability, moving toward a more neutral monetary policy stance will help maintain the strength of the economy and labor market.”

Williams predicted what more balanced growth would look like:

· Real GDP to grow between 2-1/4 and 2-1/2 percent this year and to average about 2-1/4 percent over the next two years.

· The unemployment rate to edge up from its current level of about 4 percent to around 4-1/4 percent at the end of this year and stay around that level next year.

I reported another important fact last week. The BEAsaid that profits from current production (corporate profits with inventory valuation and capital consumption adjustments) almost doubled in the final revision. So strong economic growth continues as inflation is declining.

Even more optimistic growth predictions for third quarter growth come from the Atlanta Federal Reserve GDPNow estimate.

AtlantaFed

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 3.2 percent on October 9, unchanged from October 8 after rounding. After this morning's wholesale trade release from the US Census Bureau, the nowcast of third-quarter real gross private domestic investment growth decreased from 3.4 percent to 3.3 percent.

So why has job growth been so high, even with the Fed’s restrictive credit policies for the past two years? A grand total of 256,000 jobs were added to nonfarm payrolls in September.

September’s unemployment report showed governments, and the construction industry created 56,000 new jobs. These are largely jobs in rebuilding our infrastructure, a product of Bidenomics. Another 156,000 jobs were added in Leisure/Hospitality, Education and Healthcare.

The Infrastructure Investment and Jobs Act (IIJA), aka Bipartisan Infrastructure Law (BIL), was signed into law by President Biden on November 15, 2021. The law authorizes $1.2 trillion for transportation and infrastructure spending with $550 billion of that figure going toward "new" investments and programs.

Need we say more on what is continuing to power economic growth?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why the Inflation Confusion?

 Popular Economics Weekly

Most pundits (and propagandists) don’t know who to blame for ‘sticky’ inflation, so they blame those who haven’t caused it—such as the current administration or the Federal Reserve.

But the sudden rise in prices was caused by supply shortages and empty shelves from the COVID pandemic and lockdowns that followed. And this happened in all countries. Now add to this several wars that have disrupted more supply chains, including a developing cold war with China, and global warming which is causing massive droughts and floods that have disrupted food supplies and displaced whole populations.

Leading economists, such as Nobelist Paul Krugman, have said the Fed with its policy tools can’t bring down prices in most sectors, just slow the rise in prices, which it has done so that inflation is now rising much more slowly.

It would take another full-blown recession and the loss of millions of jobs to cause prices to return to pre-pandemic levels, as has happened in every other recession portrayed in the FRED graph from 2000 (gray bars are recessions).

FREDcpi

It happened during the brief pandemic recession, for instance, when retail CPI inflation fell to zero percent in May 2020 and everyone out of work before rising to 9% in June 2022, and the earlier Great Recession when retail price inflation fell to a negative -2% in 2009, with the loss of more than 8 million jobs.

The worldwide pandemic lockdowns and supply chain stoppages were the most obvious cause of the supply shortages that brought on inflation rise to 9% in 2022, and steady decline of inflation since then as supply chains opened again to bring it down to the present seasonally adjusted 3.5% inflation rate.

It’s not easy for discontented consumers to blame the worst pandemic in 100 years for the sticky inflation figures because the COVID pandemic was such an unusual event that the trauma of one million US deaths has been quickly forgotten.

And it’s just as difficult to for consumers to imagine how the Middle East and Ukraine wars can disrupt oil and food supplies, as well as that due to global warming.

What is the best answer to this dilemma of higher prices and looming supply shortages? Faster economic growth, which the Biden administration with some bipartisan assist is doing with its New, New Deal Bidenomic policies that have employed millions.

The CHIPS Act is bringing back manufacturing jobs, the Inflation Reduction Act is countering global warming by funding alternative energy sources to fossil fuels, the Infrastructure and Jobs Act is spending $1 trillion to fix our infrastructure and projected to create more than 2 million jobs over the next decade.

But it requires consumers to think of its future benefits to know that we are in a better place, and can positively answer the question, are we better off today than four years ago?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Return of the Bully Mentality

 The Mortgage Corner

The NYTimes Bret Stephens lamented the “bullying mentality” at the heart of the pro-Hamas movement in a recent Op-ed that lamented their attempts to shut down pro-Israeli speakers. Hamas is a movement that wants to completely eliminate the state of Israel.

Such protests have even permeated UC Berkeley, my alma mater. It’s shades of the 1960s and 70s anti-Vietnam protests, but instead of peace loving and ultra-liberal protestors, many of the protests seem to be supporting violence and Hamas terrorists.

Such a mentality, or bullying behavior to use its more common term, is once again affecting the budget battles we still have today, especially concerning aid to Israel and Ukraine, with some Republicans attempting to even block debate on a bill, after the Biden administration was able to pass many bipartisan bills that supported the post-pandemic recovery.

It mirrors bullying behavior I wrote about in a 2014 contributor column for Huffington Post during earlier budget battles, in which I quoted Paul Krugman:

"But nobody expects to see a lot of prominent Republicans declaring that rejecting Medicaid expansion is wrong, that caring for Americans in need is more important than scoring political points against the Obama administration. As I said, there's an extraordinary ugliness of spirit abroad in today's America, which health reform has brought out into the open."

The "ugliness" he speaks of is really a bully mentality. Bullies prey on those weaker than them, and so the most conservative Republicans have tried every trick in the book to oppose any programs that smack of aiding those most in need.

“Not all Republicans are bullies, and not all Democrats enlightened progressives,” I said then. “But the bully mentality of House Speaker John Boehner's "no compromise" tactics, or Senator Mitch McConnell's filibustering of even the most innocuous Obama administration appointments have been the reason recovery from the Great Recession hasn't been stronger.”

And it continues with the attempts to bully House Speaker Mike Johnson into not advancing a desperately needed aid package that MAGA Republicans oppose by threatening to unseat the House Speaker.

Who are the bullies? Republican House members from conservative Red states, in the main that oppose almost any form of government aid—even for border protection that passed with bipartisan support in the Senate.

They belong to the states most dependent on government support. Smart Asset conducted a research on the states most dependent on the Federal government, and found they were Republican governments, with Red states making up 8 out of top 10 dependent states.

GeorgetownPPR

The result of such bullying behavior is easy to see from this Georgetown public Policy Review graph. Beginning 20 years ago median household annual incomes between red and blue states began to diverge—rising per annum to $60,000 in 2018 in Republican-led states vs. some $72,000 in Democratic-led states.

The divergence between Red and Blue states began in 2000 when the Bush administration passed massive tax cuts that took away the 4 years of budget surpluses created by the Clinton administration and cut back many social programs; at the same time it began the wars on terror.

The Center on Budget and Policy Priorities (CBPP), a non-partisan think tank, said at the time, “Despite promises from proponents of the tax cuts, evidence suggests that they did not improve economic growth or pay for themselves, but instead ballooned deficits and debt and contributed to a rise in income inequality.”

It also led to the largest federal budget deficit; in fact, the first one $trillion federal deficit in US history. And “the Bush tax cuts (including those that policymakers made permanent) would add $5.6 trillion to deficits from 2001 to 2018,” said the CBPP.

It began an alarming trend, the “no compromise” behavior that the Biden administrations has attempted to alleviate with such as its New New, Deal Infrastructure and Inflation Reduction Acts that are bringing back good jobs to those Red states.

Such bullying behavior has intentionally impoverished many, and this might be the best of times to study and counteract its effects with a bipartisan spirit that younger generations are keen to support in many polls.

A recent PEW Research poll, for instance, tells us why Gen Z’ers in particular support compromise over no compromise: “…members of Gen Z are more likely than older generations to look to government to solve problems, rather than businesses and individuals. Fully seven-in-ten Gen Zers say the government should do more to solve problems, while 29% say government is doing too many things better left to businesses and individuals.”

Can today’s younger generations overcome such a bullying mentality that has also permeated university campuses and fulfill the promise of a greater bipartisanship they say their prefer?

Harlan Green © 2024

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Q3 Economic Growth to Double?

 Popular Economics Weekly

AtlantaFedGDPNow

We could have even higher third quarter economic growth, believe it or not, from the second quarter 2.4 percent (advance) growth estimate by the US Bureau of Economic Analysis.

The Atlanta Federal Reserve’s GDPNow model estimates a jump to 3.9 percent growth in Q3 (September to December 2023), a huge leap from its second quarter estimate that actually matched the BEA’s Q2 estimate. So, we should take it seriously, given all the good news about public spending on new infrastructure.

“The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 3.9 percent on August 1, up from 3.5 percent on July 28. After this morning’s construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, the nowcasts of third-quarter real personal consumption expenditures growth and real gross private domestic investment growth increased from 3.1 percent and 4.7 percent, respectively, to 3.5 percent and 5.2 percent.”

Construction is surging because of the US Infrastructure Act and Inflation Reduction Act $trillions being spent to modernize the US economy.

As if to emphasize the increased optimism, orders at U.S. factories rose 2.3 percent in June, largely because of more contracts for Boeing planes. Bookings for durable goods climbed 4.6 percent that are mostly consumer goods meant to last at least several years. The overall manufacturing sector is still weak and future orders have been contracting for almost one year.

How can the Atlanta Fed be so optimistic about future growth when Fitch Ratings just downgraded US Sovereign Debt to AA+ from AAA?

Much of it may have something to do with the various programs congress enacted, now being called Bidenomics, because though bipartisan it happened under President Biden’s watch.

Major economists like Nobel Laureate Paul Krugman are jumping on the Bidenomics growth bandwagon.

“It’s hard to overstate how good the U.S. economic news has been lately. It was so good that it didn’t just raise hopes for the future; it led to widespread rethinking of the past. Basically, Bidenomics, widely reviled and ridiculed a year ago, looks a lot better in retrospect. It’s starting to look as if the administration got it mostly right, after all.”

Second quarter consumer spending (i.e., personal consumption expenditures) has held up, though down from its first quarter spike. And real gross private investment is increasing 5 percent annually, thanks to those $trillions government is spending to stimulate private investments that is modernizing almost every area of our economy, from roads and bridges, water treatment facilities, airports, energy grids, to rural Internet hookups.

And a higher percentage of Americans are working than before the pandemic, so why shouldn’t the US economy look even better in Q3?

Harlan Green © 2023

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen