Breitbart Business Digest: Biden Is Fighting 2009's Economy in 2024

Biden’s Still Crazy After All These Years

Joe Biden is not a general, but he suffers from the generals’ curse of always fighting the last war.

The U.S. economy suffered from a persistent dearth for demand for labor in the decade or so that followed the financial crisis. Arguably, the problem started even earlier, when China expanded its economy through predatory mercantilist policies that successfully drew in manufacturing jobs from the U.S. and the rest of the world.

Underemployment appeared to become an embedded feature of the economy after the bursting of the mortgage bubble and the near collapse of the financial sector. The unemployment rate rose from 4.7 percent in the summer of 2007 to 10 percent in the fall of 2009, an unprecedented pace of destruction of the livelihoods of Americans.

The Great Recession was unusually long; and even after it officially ended in the spring of 2009, recession like conditions persisted. Economic growth was sluggish, and fears of a “double dip” continued for years. Employment did not snap back as it typically does after a downturn, leading to the idea that we were suffering from a “jobless recovery.” It wound up taking ten years before unemployment returned to where it had been in the penultimate summer of President George Bush’s administration.

For most of that decade, Joe Biden was vice president. The Obama administration’s inability to reinvigorate America’s economy appears to have made a deep and lasting impression on him. The conventional wisdom among Democrats and many economists was that the failure of the administration to push for more stimulative economic policies—basically higher levels of deficit spending—was the primary culprit.

This was a very convenient thesis for the Democratic left. Instead of demanding a fundamental rethinking of the progressive approach to economic policy, it led to the notion that the problem was that they just hadn’t done enough of the progressivism stuff. They should have spent more, they should have redistributed more, they should have pushed harder on green transition policies, the progressives told themselves. The real culprits were not their own economic policies, but their failure to pursue them harder, made worse by obstruction from Republicans and their Tea Party.

Learning the Wrong Lesson from the Last Crisis

It was obvious to many outside the bubble of the Democratic left that this was a shallow view of America’s economy. It largely ignored the role of China, for example. With China hellbent on absorbing demand from the rest of the world to allow its own economy to grow, U.S. policies aimed at stimulating demand had the effect of boosting Chinese employment rather than domestic U.S. employment.

Tax policies that might have helped boost domestic investment—such as cuts to corporate taxes or capital gains taxes—were (and remain) an anathema to progressives. As a result, they were unwilling to endorse budgetary compromises that might have allowed for the bigger spending packages the left favored in exchange for tax cuts favored by pro-growth Republicans. And instead of seeing economic and climate regulation as a drag on the economy, the left insisted that these would someday, somehow create opportunities for more growth.

When Donald Trump was elected president, progressives were absolutely sure that his economic policies would be disastrous. They predicted inflation, crashing financial markets, rapidly rising interest rates, and worsening inequality.

Instead, inflation remained below the Fed’s target even while unemployment continued to fall, eventually hitting the lowest levels in four decades. The stock market soared. Tariffs began to rebuild the confidence of American businesses that U.S. policy would not leave them vulnerable to the predations of Chinese mercantilism. As a result, budget deficits actually worked to stimulate demand for labor at home rather than in Beijing’s orbit.

The Wrong Response to the Pandemic

The onset of the pandemic sent unemployment soaring, at least initially. Democrats claimed that Trump had somehow made the economic impact of the pandemic worse, and many seemed to believe it. This appeared to reflect their conviction that the U.S. economy could not recover from a downturn without the heavy hand of government—the misbegotten lesson they had internalized during the Obama era. No matter how large the stimulus offered under Trump, it could never be enough because they assumed, wrongly, that underemployment was the natural state of the economy that needed to be constantly remedied by ever larger deficits.

Biden entered the White House believing he had an electoral mandate to ramp up stimulus spending and that this was an economic necessity. His advisors pushed the kind of policies they believed were needed in 2009—instead of paying closer attention to how different the economy was 12 years later. They brushed off warnings about inflation as nothing more than Republican fear-mongering, even though some of the loudest voices sounding the alarm were Democrat stalwarts like Larry Summers.

The result of fighting the crisis of 2009 in 2021 was the worst inflation in four decades. This in turn forced the Federal Reserve—when it finally woke up to the problem of escalating price levels—to raise interest rates at a pace not seen since Paul Volcker helmed the central bank. This sudden shift created chaos in the housing market, locking homeowners with low-interest-rate mortgages into their current homes, pushing home affordability to its worst state ever recorded, and ironically stimulating demand for labor and materials by forcing homebuyers into the new home market.

Democrats are deeply dismayed that polls show the public not only disapproves of Biden’s leadership on the economy but that it gives Trump a 20-plus point lead over Biden on economic issues. They have begun concocting all sorts of implausible theories about why the public doesn’t give Biden more credit for the recovery or low unemployment and instead remains so focused on the pain caused by inflation.

Many on the left believe that the public’s disapproval of Biden and dissatisfaction with the economy is the result of disinformation. If only the media would accentuate the positive, the public would see how great and glorious the Biden economy really is. This notion is completely undermined by the fact that consumers of mainstream media and business news have far more positive views of the economy than people who get most of their news about the economy from personal experience, according to the University of Michigan’s survey of consumers.

The real explanation for the public’s lack of appreciation of Bidenomics is simple: the problem of stubbornly high unemployment is the problem of the last crisis. It was solved even before the pandemic, while Donald Trump was president. The problem of stubbornly high inflation is the problem of today. The public disapproves of Biden’s leadership because he is fighting a war of the past and losing the one we are in. It’s as if George W. Bush were to expect people not to notice how badly things were going in Iraq because Vietnam was such a prosperous country and Poland was no longer under the thumb of the Soviet Union.

The Biden administration’s election-year proposals are wildly out of touch with the economic needs of the country. It is offering tax breaks for homebuyers—an inflationary policy likely to push up home prices even more. Student loan forgiveness is similarly inflationary, with much of the money likely to wind up in the pockets of landlords renting apartments to recent graduates. The tax hikes on the wealthy and corporations the administration has proposed would do nothing to stem inflation for the simple reason that these will mostly be a tax on savings. All of the climate transition nonsense is highly inflationary.

Americans are crying out for economic policies to address the problem of inflation—and Biden is offering nothing but sermons on greed and complaints about candy bars shrinking. Meanwhile, his supporters insist that dissatisfaction with the economy is a form of madness or the result of a media somehow biased against poor old Joe.