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Matthew Gagnon of Yarmouth is the chief executive officer of the Maine Policy Institute, a free market policy think tank based in Portland. A Hampden native, he previously served as a senior strategist for the Republican Governors Association in Washington, D.C.
President Joe Biden has had a recent habit of congratulating himself on the economy and budget management.
On the economy, he has cherry picked the best possible economic news he can find, such as the persistently low unemployment rate in his tenure, and triumphantly sung his own praises. In something reminiscent of a kid giving himself a nickname and insisting that all his friends use it, Biden himself has designated all the best news he can find “Bidenomics,” and hailed it as a consequence of his brilliant financial management.
The context, though, is always more complex and less complimentary than any politician’s self-aggrandizing assessment of their own competence. Take the June jobs report, for instance. Last month nonfarm payrolls increased by just 209,000, which was well below the forecast estimates, and a big drop from the 306,000 new jobs from May. Worse, 60,000 of the new jobs were in the government sector, which are not representative of market health.
But hey, the unemployment rate is low, right? Just don’t pay attention to those persistently anemic labor force participation numbers. Doing so might make the unemployment number much less impressive.
Despite the disappointing news, Biden and his team were out spiking the football, spinning bad news as good. There have been 13.2 million jobs created since he took office, they say, and that’s a good thing, certainly.
Then again, how much of that is due to the president and his policies, and how much of it is the natural economic recovery that took place after COVID-19 ravaged the country? Consider that the nation lost roughly 22 million jobs, just at the outset of the pandemic. According to the Bureau of Labor Statistics, at one point 49.8 million people reported that they “had been unable to work at some point in the last four weeks because their employer closed or lost business due to the coronavirus pandemic.” Overall payrolls did not fully recover from the losses that were experienced until July 2022.
So as Biden pats himself on the back, keep in mind that a nation recovering jobs after a worldwide economic collapse is a natural process, and not a result of any president or politician.
If Biden wants to hang his hat on the economy he does so at his own peril. While some things do superficially promising (jobs, unemployment rate, wage growth), others (record inflation, rising interest rates, so-called real wages) have been downright catastrophic. And the things that are the worst are the things that a president actually has the most influence over.
The inflation problem (and subsequent rising interest rates) were largely created by the fiscal policy decisions of two presidents, Donald Trump and then later Joe Biden, coupled with an expansionary monetary policy. They injected trillions of dollars into the economy in a very short amount of time, spiking aggregate demand without accompanying productive capacity to meet it, overheating prices.
While one could argue that was a necessary response to COVID, Biden decided to double and triple down on injecting dollars into the economy, proposing an unwise $2 trillion “Rescue Plan” and a $6 trillion budget almost immediately upon taking office, clearly making the problem much worse.
And the cascade of record government spending we have seen since Biden was sworn in has another consequence too. Despite Biden’s repeated insistence that his administration is achieving “historic deficit reduction,” the reality has been exactly the opposite. In just the first nine months of the current fiscal year, the federal government’s deficit has nearly tripled.
From October of last year to June, the Treasury Department reports that the deficit has totaled nearly $1.4 trillion, which is a 170 percent increase from the same period of the prior year. That means that we are likely to see a deficit of around $1.8 trillion by the end of the fiscal year.
And if that wasn’t bad enough, interest payments on our existing debt in the first nine months of the year hit $652 billion, which is 25 percent higher than the year before. It is likely, then, that just the service on the debt is going to be roughly equivalent to the Pentagon budget.
Record, unprecedented spending drives up inflation and adds incredible amounts of debt. Interest rates radically increase and make that debt ever more expensive, crowding out actual investments we could make. Weak job growth, weak labor force participation and a recession still looming on the horizon. Government acting to clean up messes created by the government, creating new messes. That is Bidenomics.
