By Leslie A. Rubin
First, let’s dispense with the PBS (political bull s**t). Every politician puts a dynamic spin on everything, and usually it is more heat than light, and our current president is no exception. The best thought – ignore the rhetoric and look at the facts.
Next, let’s start by looking at the situation President Biden inherited. The last years of the Trump administration were marked by COVID, a shutdown of the economy and extraordinary federal spending and deficits. The Federal Reserve accommodated the deficits with a loose monetary policy (printing money and keeping the interest rates low) and grew the money supply by 26 percent in 2020. This was the fuel for inflation, but it didn’t appear under Trump, it showed up under Biden.
But Biden didn’t improve the situation. He continued the very large federal deficit spending with a number of programs, supported by some Republicans, which allowed the programs to pass. Notably, even as the COVID pandemic was coming to an end in 2021, the Biden administration passed another $1.9 trillion stimulus package which even some Democrats warned would trigger inflation.
Money supply continued to grow. Result: rapid inflation. Despite the huge deficits, the Fed started fighting inflation, starting in 2022 when they realized the inflation resulting from deficit spending and printing money was not “transitory”. The way to do this is to raise interest rates to slow demand in the economy and tighten monetary policy by reducing the money supply.
Over the last year the money supply has been reduced by about 5 percent. This has led to a decrease in inflation from a peak of 9 percent to about 4.5 percent, still high but going in the right direction.
Inflation and interest rates have put a damper on the economy and made everyday living more difficult. Mortgage rates have tripled and food prices have soared. And current policy is leaving the American public with a bad impression with only 30 percent of the country believing we are headed in the right direction.
The real wages (actual wage increases less inflation price increases) have declined 7.5 percent since Biden took office. That means we can buy less with the disposable income we have. And rising interest rates, combined with high home prices, have caused home affordability to drop by 37 percent. On top of that, savings are being depleted and credit card debt has significantly increased along with delinquencies on credit cards. The current situation has indeed left us in a sour mood.
Further, the current policies have continued to grow the government and its huge deficits which are projected to grow forever. The Federal debt has gotten the attention of the public yet there is no move by our politicians to correct any of this. Bottom line: The root causes of our current economic difficulties are found in both the Trump and Biden administrations.
There is plenty of blame to go around, but the facts speak for themselves. Touting that Bidenomics is great doesn’t stand up to reality and the people know it. But while the problems aren’t all his doing, nevertheless his deficit spending policies have continued and enlarged the problems, not addressed them. This has led to enormous deficits and spiraling government debts, and projections for even worse over the next 10 to 30 years. We have had continuing growth in government for the last 22 years after some real progress was made under former President Bill Clinton.
All of this is culminating in the mess we have in DC. We need to fix this mess. Yes, us, the voters must let our representatives know we want this fixed — now. On our web site you can easily send a message. Go to the Contact Congress link and enter your name and address, and then send.
Leslie A. Rubin, who is based in Clearwater, Florida, is a professional accountant, entrepreneur, and real estate developer. He has a clear understanding of what makes economic systems work, the power of incentives and is the founder of MainStreetEconomics.org.