TThe November midterm elections are fast approaching. The Democrats tout their massive stimulus, the phonily named Inflation Reduction Act and the unconstitutional student loan giveaway.
But the economic facts call for them to suffer defeat in November.
President Joe Biden last week spoke of record low unemployment. He explained that headline inflation rose just 0.1% month-on-month. Biden conveniently ignored comments from pro-democracy Harvard professor Jason Furman that the August CPI report did indeed point to an acceleration in inflation. Furman
explained
that the Cleveland Fed’s median CPI, which excludes any large moves in either direction and is better predicted by the labor market slowdown, showed an annual inflation rate of 9.2% in August, the highest single monthly reading in their dataset (which begins in 1983). Furman also suggested there is one
real possibility of stagflation
with an unemployment rate of at least 6% and persistent inflation above 4%.
Put simply, Democrats are arguing that a red-hot job market, with very high wage inflation nearing 7% and the highest consumer inflation in nearly 40 years, justifies voter confidence and the re-election of a Democratic majority to both congressional bodies. That position is ridiculous compared to what Republican fiscal and economic policies have achieved during the Trump administration.
In the fourth quarter of 2019, just before the COVID pandemic swept the country, people were enjoying a veritable “Goldilocks economy”. These included low, well-contained inflation, full employment, and real wage increases in line with secular productivity growth. The Bureau of Labor Statistics described the 2019 job market as follows: “The U.S. job market remained strong…as the unemployment rate fell to 3.5%, the lowest rate since 1969. Civilian employment and participation rates increased during the year.”
Also in the fourth quarter of 2019, the population enjoyed a real inflation-adjusted increase in disposable personal income of 1.5% with very low, stable inflation of 1.6%. Top line: Republican’s 2017 Tax Cuts and Employment Act (specifically, cutting the corporate income tax rate from 35% to 21%) helped create a full-employment economy with ultra-low inflation — that is, a central banker’s dream.
In contrast, democratic economic policy can best be characterized as adopting modern monetary theory: helicopter drops of money and massive deficit spending. We may have a full-employment economy, but we also have a 2.8% fall in real average hourly wages measured from August 2021 to August 2022 – oh, as well as the highest inflation rates in 40 years.
Judging by their recent respective records, the Republicans gave us a full bowl of warm porridge. Democrats give us cold gruel. The economic facts promote associated voting decisions.
James Rogan is a former US Field Service Officer who later spent 30 years in finance and law. He writes a daily note on finance and economics, politics, sociology and criminal justice.
