President Joe Biden’s claims about the success of “Bidenomics” are falling on deaf ears for Americans who have had their real wages battered by inflation, Breitbart Economics Editor John Carney explained in a Friday interview on Fox Business Network.
An AP poll last month found that 76 percent of Americans view Biden’s economy as “poor,” and it is easy to understand why, Carney explained.
“One of the things you can’t fool people about is inflation’s effect on their home finances,” he said. “Everybody can see that even if their paycheck has gone up, their bills are going up even faster. And that’s what we mean when we say that real wages are falling. They have fallen by a lot lately because inflation has come down. They’re not falling as fast as they used to be, but if you track it all the way back to the beginning of the Biden administration, people have seen themselves become poorer and poorer every month for it was something like 21 months in a row, a record number of months of decline of real wages.”
Carney said that this decline in real wages is also why credit card debt, but this borrowing and spending creates a particularly vicious cycle during a time of rising inflation.
“People have to borrow in order to keep up, and it is unfortunate because, at the same time, to fight that inflation, the Fed is raising interest rates. So, not only are people borrowing more; they’re having to pay more on the debt that they borrow, which just increases the cost even more,” he explained.
Fox Business host Asman asked Carney if the revised first quarter GDP estimate released this week gives hope that the economy could “escape a recession” and “grow just enough” to give President Biden some “bragging rights” about his economic record.
“I don’t think we can escape a recession,” Carney said. “I think we will not have a recession this year. I think a lot of the people who thought we were going to have a recession are now having to revise that view.”
“The Fed has made it really clear that they are going to defeat inflation even at the cost of having a recession,” Carney added. “So, I think actually, Biden may be out of luck because we may get a recession in an election year next year [in] 2024. That’s still very likely to me. So, I don’t think the recession has been avoided. I think it’s just been pushed off.”
Carney has long predicted that the much-heralded recession would not strike this year. In Thursday’s Breitbart Business Digest, Carney explained that the latest GDP data showed the strength of American consumers who were shifting their spending habits away from goods consumption to services. This shift, however, is cause for concern, he noted:
The revisions did present a reason to be concerned about the persistence of inflation. As noted above, the rotation out of goods and into services was even stronger than expected in the first quarter. Unless the labor market significantly weakens, this is likely to continue to gain steam as the year goes on.
The trouble arises from the fact that the supply of services is largely constrained by the supply of labor. When spending was heavily concentrated on goods, some of the inflationary pressures created by higher demand leaked out to foreign producers. As spending on services increases, there’s less leakage because the vast majority of services are domestically produced. So, the rotation will add to wage and price pressures in services.
As Fed Chair Jerome Powell’s remarks this week have made clear, the Federal Reserve is still very concerned about inflation in the services side of the economy. The shift in consumption and what it implies for inflation may put pressure on the Fed to continue hiking beyond the two increases everyone has penciled in for this year.
The big question, Carney wrote, is whether Powell is willing to push the economy into a recession during an election year, which would undoubtedly complicated Biden’s re-election bid.
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