‘Let them eat cake’ is irresponsible economic policy.
By Peter Navarro – – Tuesday, July 11, 2023
“Bidenomics” equals stagflation. That’s America’s sober economic reality after more than 2½ years of the Biden presidency, pockmarked by profligate government spending, soaring interest and mortgage rates, a precipitous loss of strategic energy dominance, a southern border invasion, a new and expensive endless war, and a rapidly expanding trade deficit.
Stagflation is a “tax” crueler than inflation alone, which eats away at our purchasing power. This is because the “stag” part of stagflation also entails recession or slow economic growth.
As the 2024 presidential election approaches, Bidenomics is conjuring up the ghost of a 1970s stagflation past that ended in a landslide victory by Republican candidate Ronald Reagan over Democratic President Jimmy Carter. In the final 1980 presidential debate, with polls surprisingly close given the grim economy, Reagan asked the American people, “Are you better off than you were four years ago?”
That question — and its obvious “no” answer — triggered a decisive break in undecided voters to the Reagan camp.
Will this Reagan-Carter past be prologue to a resounding defeat of President Biden?
The answer to this question must begin with this observation: Mr. Biden’s Democratic Party is supposed to be the party of America’s working classes and wage earners. Yet American labor is now bearing the heaviest burden of Bidenomics.
This burden is most evident in the (mostly) downward trajectory of “real wages,” which measure actual or nominal wages adjusted for inflation. When inflation is rising faster than nominal wages, real wages are falling along with workers’ purchasing power.
This is what is astonishing: Of the roughly 900 days Mr. Biden has been in the White House, real wages have fallen for almost 700 days — about 75% of Mr. Biden’s time in office. The collective drop in real wages has been 3% rather than the robust real wage gains workers deserve and expect.
Against this backdrop of falling real wages, energy prices have skyrocketed. From truckers and Uber drivers to commuters and flyover country ranchers and farmers, the pain of a nearly 50% rise in gasoline prices has spread far and wide.
Meanwhile, it’s “bundle up” time as the cost of home heating oil has jumped 36%.
In the Marie Antoinette “let them eat cake” category, Bidenomics has also delivered a 16% increase in milk prices, a 25% increase in beef prices, and a whopping 82% increase in egg prices. As for shelter, home prices have risen 32% and rents have risen 15%, and it now costs 21% more to keep the electricity on.
So how has “capital” fared compared with “labor”? A bit better, but not exactly well. Here, any lag in capital performance is important, and not just to Wall Street.
America’s Main Street pension systems need robust market returns to stay solvent over time.
Since Mr. Biden’s inauguration, the S&P 500 index, the broadest measure of capital performance, has risen 16%. While that may sound robust, this single-digit annual improvement lags behind the historical double-digit annual average of the last 20 years.
It’s far worse for the tech-laden Nasdaq, whose return has been nearly flat in the Bidenomics era (about 2%).
It should be no surprise why Bidenomics is failing. Its primary strategy is grounded not in sound economics but rather cynical politics.
Mr. Biden and the Democrats will deliver a massive (and massively excessive) multitrillion-dollar Keynesian stimulus in the months leading up to the 2024 election. They hope to buy off large swaths of the electorate with a short-run fix of “good times.”
This political ploy may work — stay tuned. But at what cost?
The U.S. currently has a ratio of debt to gross domestic product of about 120%. This level is already unacceptably high — an ideal level is below 50%.
But with the Bidenomics over-stimulus packages set to help drive the national debt to about twice the size of the U.S. economy over the next 30 years, America’s debt-to-GDP ratio is projected by the Congressional Budget Office to rise to nearly 200% by 2050.
Why does this particular yardstick matter? Because any country’s debt-to-GDP ratio measures the ability of its taxpayers to fund essential government services such as infrastructure, education, health care, national defense, Social Security and Medicare.
In this case, as Bidenomics and stagflation drive up the debt and slow GDP growth, more of America’s tax dollars will be spent servicing our national debt and less and less will be spent on serving the American people.
In these ways, Bidenomics not only equals stagflation. It guarantees a bleak economic future for Americans young and old alike and a significantly diminished ability to provide for our education, health care, transportation and defense.
• Peter Navarro served in the White House as former President Donald Trump’s manufacturing czar and chief China strategist. This column originally appeared at www.peternavarro.substack.com.