It is the economy, stupid. But whose economy?
President Biden praised his economy, but the folks around the kitchen table saw if differently. Now we have President Trump saying his economy is A++++++, but those folks in the kitchen are disagreeing according to the polls.
Many see similar situations – with Presidents engaging in hyperbole and the people back home suffering the reality. But … the situations are not the same. The people were right in the Biden case and … shall we say … are not so right in the Trump case. And the statistics prove it.
Most notably, Biden’s big spending bills were a major reason we hit a record high – 9 percent — inflation rate during his term. At the same time, wages were stagnant. That was a serious hit on the family budget.
Under Trump, costs have risen approximately 3 percent, just a bit above the Federal Reserve’s healthy 2 percent annual growth rate. Not exactly runaway inflation. To some extent, Democrats have been able to convince people that a modest “normal” increase in prices is inflation – and is catastrophic. They are misrepresenting the fact that prices always go up, except in the most severe economic collapses. And we have not had one of those since 1929.
(Allow me to underscore that last point with personal examples. When I graduated from college, I got what was considered a “good executive job “with the phone company. I was getting paid $5,500 – a smidgeon over $400 per month. . I recall filling up the gas tank of my first car at 29.9 cents per gallon. And a hot dog cost fifty cents.
In 1969, I bought my first house – a 3-bedroom Georgian – near Chevy Chase Circle in Washington, D.C. for $40,000. In the early 1980s, I purchased a second home on the shores of Lake Michigan for $57,000
According to Zillow, that first house in D.C. is currently valued at $1.3 million. I sold the Lake Michigan house about 20 years ago for $1.2 million. My most recent gas purchase was $2.89 (down from more than $4.00 under Biden) — and hot dogs are going at $6.00 and up, often without fries. Every senior citizen can tell similar stories of how prices have risen, and we do … very often.
At one time, my Medicare Advantage Plan once had a premium of $100 per month. Today there is no premium. The co-pay on most of my prescription drugs have gone down to zero. The visit to my personal care physician has dropped from $35 to zero. Specialists dropped from $75 to $35. I am on a rewards program that gets me a couple hundred bucks for OTC purchases. Admittedly, I am not a person who needs extraordinarily expensive medical services and medications – but the cost of my healthcare has actually decreased in recent years.
Some food costs have gone up in recent times – particularly beef. But our Thanksgiving turkey was 79 cents a pound – same as 2024. I recently purchased avocados for 49 cents each – back down to the pre-COVID price. By adjusting my shopping, my grocery costs have not gone up appreciably since the end of the Biden inflation.)
The point is … the hit on the family budget does not appear to be as bad as Democrats would have us believe. The notable exceptions – and they are significant – have been the cost of housing, despite low mortgage rates, and childcare. Young people have a tough time getting into their first home. People also get hit hard in the rental market.
Unfortunately, Trump tends to counter Democrat hyperbole with hyperbole of his own. There are issues in the economy that need to be addressed. The economy is strong by all measures, but not the A+++++++ that Trump trumpets. And since he is a man with a self-inflicted credibility problem, his claims do not resonate well with the folks back home.
What makes the Trump economy better than the Biden economy is not only the lack of a high inflation rate, but the increase in wages that compensate for much of the cost increases. Not everyone’s wages have increased, of course – and Social Security’s so-called Cost-Of-Living-Adjustment (COLA) always lags behind the real cost increases.
There are a lot of folks suffering serious economic problems, but I would argue that the number is not nearly as high as Democrats suggest. Retail sales, alone, suggest that consumers have a lot of money to spend. And ironically, all that money tends to drive up prices. We Americans – even the poor — live better than most people on earth. We should think of the glass as more than half full rather than mostly empty.
So, there ‘tis.
As usual, the right gets it WRONG, again. Trump expanded M2 by a huge amount before he left office, the inflation we got later was all Trump:
https://www.dallasfed.org/-/media/Images/research/economics/2024/0220/dfe0220c1.png
Someday our educational system will teach REAL economics, but I’m not holding my breath.
PS: M2 is soaring again, under Trump, you can expect inflation to follow, next year or 2027. Trump is running record budget deficits, what do you think happens when you spend way more than you take in, and have to “print” money to pay for it?
https://fred.stlouisfed.org/series/M2SL
Andy … You do not have to print money to cover excessive spending. You can borrow. And that is not good either, The only sane policy is a DRASTIC cut in federal spending. If we do not, the economy will correct itself by crashing as the debt load becomes unsustainable. We are in an economic hole and the folks in DC are still digging. Over the long stretch, I would argue that the Republicans are at least not as bad as Democrats in Congress.
Actually, the choices are either drastic cuts OR increased taxes OR some of each, which I prefer at this point. You also can put in a balanced budget stipulation either by Constitutional amendment forever OR by Congressional agreement, probably timed. I prefer the later, timed, with metrics for early escape (great GDP, deficit solved, etc).
At this point, I prefer a multi-pronged attack; it will take decades to cure, but I am betting we can beat the 35-year version undertaken by The Greatest Generation.
While Larry might feel a crash is survivable, I am not sure we are not in collapse territory and the results being worse than The Great Depression with Musk and friends heading to their bunkers in New Zealand.
Larry and I agree on the issue, differ on the solution(s), and in no way is he correct that Democrats are worse on this. His vote holds the record for largest deficit ever. Reagan is the one that turned around the direction, and not in the right way, that The Greatest Generation set for us, The Great Recession started on Bush’s watch, and their spending/deficit record comes in second. Three out of four worse deficits are Republican.
Bill Clinton is probably the best economy the US ever had. He is a Democrat and I am a Clintonian Democrat. That’s why Larry and I agree that bringing down the deficit, the debt, is our top priority. Not the brown people.
Andy … I fear YOU are getting it all wrong on the recent inflation. I can understand the concern about spending and deficits under Republican administrations, I share that concern. While I have written in the past that Trump’s 11th hour stimulation checks had an inflationary impact, the inflation of the 2020s was on Biden and his huge spending bills. You a are correct in that our universities teach Samuelson tax and spend economics… not free market Adam Smith.
At 3%, the inflation is indeed not bad IMO, but it’s the grueling, unrelenting, compounding that pounds families into the dirt of debt. I think Larry has indicated our personal debt at an all time high end of 2025. On top of inflation, that’s not good.
Consumer confidence is trending down.
Trump, our economic Svengali, tells us the problem is we buy too much and that all those feelings we feel, and think we see, are not real. Fake feelings, buy less dolls. Fake emotions, buy less pencils.
Like Biden, he’s avoiding the subject and praying for blue sky.
Like Biden, his economy is uneven; this time he’s convinced his folks it’s ok, the oligarchs are rolling in it, and I am being hit with more taxes every day. They hit my Social Security even taxing tax-free interest as earned income. A relative never cleared $100K ever and they hit her Social Security in what I call “meanie testing,” They taxation-without-representation my purchases with tariffs.
You can see it in the sales and discounts from higher-end mail order —- they be given it away. Everyone may be spending still, but they are moving to lower-priced alternatives and generics. GDP will suffer ultimately from that even if we buy as many units.
To say we are not at extreme risk right now would be an understatement.
To say Republicans manage the economy better would be a lie, based on the metrics and statistics. Not that Clinton did not steal good ideas from Republicans. Obama and Biden too. Otherwise we wouldn’t have kept the Bush and Trump tax cuts, although I say the Trump ones should have been pruned in 2023 or 2024. Tax the rich more than you tax the middle and lower.
Speaking of which, back to taxes…… Have to drop me by a tax bracket or die this year. Keep rising. Can’t even redeem IRAs cuz tax too high. Was not supposed to work that way, but guess more is OK. Olay!!!!!
Larry,
As of June 24, 2024:
President Trump approved $8.8 trillion of gross new borrowing and $443 billion of deficit reduction during his full presidential term.
President Biden has so far approved $6.2 trillion of gross new borrowing and $1.9 trillion of deficit reduction.
The roaring inflation we got can be laid at the feet of Trump.
Andy: I think both roaring and feet of Trump is an exaggeration. 3% is not roaring and Trump is more responsible for policies that don’t bring it down like tariffs and Social Security means testing and soon, expiration on aca credits. But inflation has been near 3% since Biden got us there in June of 2023.
3% sunk Biden and it’s sinking Rump too. We say it’s low, but it’s been 2.5 years and that adds up.
In reality Biden didn’t cause it alone and Horrsr knows it. Trump didn’t cause this bout alone either, but he’s doing nothing about it except what will make it worse.
Andy, so true. Highest deficit in three years, matching one year of Biden and LOSING to two years of Biden.
Worse yet, he’s booking the tariffs which are in court and may be refunded to the importers.
Two things will happen if that does
1. I will be rich by buying importer stocks like Walmart, Cosco, Target, and even Bumble Bee Tuna.
2. the 2025 deficit will blossom in amounts, hundreds of billions, equal to the refunded tariffs.
Arguments were heard by SCOTUS on 11/5; Trump is already maneuvering to book tariffs to make them harder to refund, and while SCOUTS decision expected any day, could be mid-2026. It will be huge and could literally sink our 2025 results beyond their current muddy bottom depth.