The Biden economy, by any real measure, is good. Real GDP and real personal consumption expenditures have fully recovered. Full employment has been achieved. And yet, for reasons inexplicable to the high IQ, Biden is getting strongly negative approvals on the economy, particularly from the low IQ, and public perceptions of the economy have steeply fallen (particularly among the low IQ) since the beginning of the year. There is strong evidence this is simply due to gas prices, but let’s look out a bit further and see what Biden might have done to contribute to this miserable situation.
Now, many observers have attributed the rapid nominal and real growth we’ve seen in the U.S. to fiscal stimulus. But this is implausible. We had lots of fiscal stimulus in 2008-9, it didn’t change anything. Japan had lots of fiscal stimulus since 1991, it didn’t change anything. We had a substantial amount of fiscal contraction in 2013, it didn’t change anything. The more plausible culprits for the rapid economic growth in 2020 and 2021 are accomodative monetary policy and the fact the shutdowns in March hit high-income workers least. Indeed, even a schoolboy knows fiscal contractions never cause recessions, while Fed actions should be looked at with eagle eyes when forecasting them. Things are not symmetrical when it comes to nominal economic expansions, but similar principles apply.
Many observers have blamed Biden’s low approvals on the economy on rising overall inflation, rather than simply on gas prices. But this is implausible. There is no reason for people, especially with few savings as the low IQ tend to have, to care about overall inflation at all. If there’s anything overall inflation has done during 2021, it’s been to contribute to greater economic efficiency (both by lowering real wages, thus raising demand for workers, and by raising prices, thus alleviating shortages), which should not hurt public approvals -Reagan was re-elected in a landslide in 1984 despite falling real wages. Shortages are a more plausible reason for low Biden approvals on the economy, but they have not generally impacted the public to any strong degree -except for one type of shortage, the shortage of workers. And here is where we get to fiscal stimulus’s impact on the economy.
As is well known, fiscal stimulus (and monetary stimulus) generally does not boost real GDP when the economy is at full employment -and, though the economy was not at full employment in January 2021, it was rapidly getting there. Did Biden’s fiscal stimulus expand the supply side, which could result in higher real GDP when at full employment? No. In fact, the fiscal stimulus Biden enacted in the first half of 2021 seems to have lowered real GDP, both by dramatically increasing the shortage of workers until September 2021 (there is no strong statistical evidence for this, but the powerful strength of the anecdotal evidence is enough here) and by hurting the productivity enchancers (a much better term than the moronic “job creators” -jobs create themselves) by increasing transfers from the rich to the poor. Now, redistribution from the rich to the poor might have made sense in light of the economic losses created by the pandemic, but those losses were rapidly and dramatically becoming remedied as of January 2021, thus resulting in the transfers Biden signed being rather excessive, especially in retrospect -there is no point in remedying losses that are ceasing to exist by the day. The worker shortage, even more so than the supply chain crisis, has resulted in the Peter Principle on which American capitalism operates rising to an extraordinary height, thus lowering the quality of service Americans tend to recieve, lowering public perceptions of the economy directly, though being consistent with a very high level of productivity in the statistics.
This is why the Goldman Sachs’ claim Biden’s Build Back Better spending bill would raise GDP is so utterly, totally, and extremely moronic -higher government spending, with work disincentives, definitely in the long run and especially at full employment (which is where we are now), tends to lower real GDP, not raise it. This is the case even in the short run. Biden should thank the Senate Democrats for scrapping the bill, and understand he made a mistake back in March when he signed the massive $1.9 trillion stimulus, which hurt the economy.