Say it with me: The Biden Boom
Operation Middle-Out Economics is unfolding
The GOP tried to talk the country into a recession. Donald Trump warned Americans that Biden will create a depression. Biden has, however, built an economy that is simply refusing to die off, even after the Fed vacuumed away money from the economy with the world’s biggest vacuum cleaner.
12.1 million jobs added in 2 years. Unemployment rate of 3.4%, the lowest in 54 years. 2 job openings per unemployed person. Leaders only amplify the impact of the teams they put together. Biden has assembled one of the best economic teams in history, and the impact is being felt all around the world.
Despite warnings from business leaders, economists, politicians, and others that a catastrophic cliff was imminent, the U.S. economy simply refused to collapse.
I had a strong sense that all of these people were making things up, because how many of these politicians and economists warned us about the ramifications of the 2017 Trump tax cuts that devastated the federal budget?
They were either quiet or very supportive of Donald Trump’s tax cuts. But they spoke up in their loudest voice during the run-up to the 2022 elections repeatedly making the case that the United States was headed towards a recession.
Vested interest. Nothing more to read between their lines.
Currently, the unemployment rate is at its lowest point in 54 years, at 3.4%.
It is no small feat to accomplish that right after a pandemic, right after a strong bout of inflation and right in the middle of a war that is raging at the borders of Europe.
It is historic.
The Trump republicans told the country that Biden would abolish the suburbs and trigger a depression. Biden has set the stage for a paradigm shift in economic thinking. The beauty of this is — we are just getting started. If the House GOP does not push the country into default and mess up everything, there is a lot more to add to the American economy.
GOP is the fiscal irresponsible party
Aside from being democratic presidents, what do Bill Clinton, Barack Obama, and Joe Biden have in common?
They are the only three presidents to lower U.S. deficit.
The Reagan-Bush senior combo more than tripled the deficit. Together the Republican stalwarts took the deficit from $78.9 billion all the way to $255 billion. Then Clinton took the Presidency and gave $128.2 billion surplus to the next Republican president, George W. Bush. He waged two wars that cost the country more than $8 trillion and when he left, deficit was roughly $1.4 trillion. Democratic president Barack Obama reduced it to $584 billion. And then Donald Trump took over and left office with a deficit of $3.13 trillion. By the end of 2022, Democratic president Biden has reduced the deficit to $1.38 trillion.
Now the House GOP is threatening to push the country into a default because of the deficit piled up by their own party leaders. Where were all these people when Donald Trump was the President? Why are they coming out of the closet now?
I mean…..come on!
Republicans are still considered to be better at handling the economy by the entire country. By per capita GDP, the last five states are republican-run every year. Isn’t it obvious that if these people claim to be competent at something, the proof must be in the pudding?
But there isn’t one. There is not a single data point you can show and make the case that the GOP is better in handling the economy. The GOP is simply way out of its depth when it comes to governing the economy. GOP is a party of the billionaires, by the billionaires, and for the billionaires.
The Stubborn Economy
In 2016, Donald Trump promised he will add 25 million jobs over the next decade. President Biden added half of that in two years. 12 million jobs added to the economy in two years. Critics will try to hoodwink everyone by saying that this was pandemic recovery.
Not so fast.
At its worst, the United States lost 22 million jobs due to the pandemic. By August 2022, all those jobs were recovered. However, job growth has continued even after all jobs lost during the pandemic have been recovered.
Jobs added:
- January 2023: 517,000
- December 2022: 223,000
- November 2022: 263,000
- October 2022: 261,000
- September: 263,000
How did this happen?
The United States is still experiencing the side effect of directing benefits to everyone (middle-out economics), instead of piling it at the top (trickle-down economics)
There is a huge practical lesson that needs to be learned by the entire world in economics.
Post-2008 financial crisis, the Obama administration pumped a lot of money into the economy. In those days, democratic administrations were overflowing with graduates from the school of trickle down economics.
Money was ploughed to the top. The Obama administration bailed out Wall street, but allowed market forces to handle everyone else. As a result, the stock market recovered in less than two years. Job recovery took nearly eight years.
In 2009, benefits were predominantly targeted towards big businesses with the expectation that it will protect the economy first and then slowly filter down to the rest of the economy. The Biden administration has reversed this ideology. COVID-19 relief was targeted a bit more evenly between the top, middle and the bottom of the society.
Out of the $5 trillion the Biden administration injected into the economy as COVID-19 relief, the biggest beneficiary was individuals and families ($1.8 trillion) followed by businesses ($1.7 trillion).
→Savings increased.
→Demand for goods went up.
→Inflation soared, but so did the business need to hire hands in-order to build more goods.
→And the circle of growth thus began.
Locked up supply chains, soaring shipping costs, rising energy and commodities price played spoil sport. But the benefits that were routed to the middle class had already found its way into the economy. The economic growth simply became too much to be stopped at this point.
The growth will start to taper at some point. It has to. But the Biden administration seems to be intent on delaying the slowdown as long as possible.
Biden’s investment approach tries to turn Ronald Regan’s top-down, supply-side economics on its head. It tries to achieve economic growth by stoking demand through a stream of investments that strengthens the working class. Sustained employment opportunities in futuristic businesses is an extremely important part of that plan.
There is nothing new about this. Governments all over the world use their own investments to stimulate growth. That’s what China has been doing for years. The Indian government does it. Many countries around the world do the same. Investments by governments can have a dramatic impact on employment, demand, and consumption when they are done properly.
In Thomas Piketty’s “Capital in the Twenty-First Century,” he concluded that a capitalist economy is an inequality engine whose malignant effects can only be mitigated post facto via redistribution.
The moment we read the word redistribution we are all conditioned to think socialism or a government trying to take money from hard workers and gift it to undeserving lowlifes.
The Biden administration is redistributing wealth by refusing to reward wealth. By investing in industries, it is making itself an active participant in the economy instead of acting like a passive regulator. By allowing tax payer money to seep towards the tax payers through investments it ceases to be a subsidies manager.
All of these actions may seem like vanishing spokes in the economic wheel. Neither Biden’s policy was entirely progressive nor was it entirely trickle down. Neither did he find a middle ground.
Instead, what he has done is, he went after the crux of the problem America has been facing for decades.
Income inequality.
Still don’t believe me?
Inflation is coming down. Not only in the United States but in the entire world. But the 5.1% wage increase the United States recorded in 2022, is now locked into the economy.
Let us not forget, the United States is still adding jobs. That means there is still upwards pressure on wages. Stock market is flat. Wages are up. The math is not exactly hard to calculate.
