Inflation, interest rates and immigration – the three I's – have created a toxic economic mix for the bottom 50% of American wage earners during President Joe Biden's first three years in office. The State of the Union address shows that Biden still does not understand why lower income citizens have had it with being force-fed his foul concoction.
His three I's policies have created a Reverse Robin Hood Effect, robbing from the neediest and giving it to the richest. Indeed, in former President Donald Trump's first three years, the top 1%'s share of financial assets was virtually unchanged, rising just 0.6%. In the same amount of time under Biden, it has increased 4.9%. The opposite has been true for the bottom half of the income distribution. Their share of financial assets has been flat under Biden but rose 13% under Trump.
While inflation adjusted average hourly earnings rose 2.4% during Trump’s first three years in office, they have declined 2.2% under Joe Biden. In short, work has been devalued in Joe Biden’s economy, and American families are not keeping up with food and housing.
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Biden tried to give the American public a scapegoat for his resounding economic failures, blaming the rich and singling out billionaires and earners over $1 million as targets for higher taxes. In doing so, he seemed to be channeling gangster Willie Sutton's mantra of robbing banks, "because that's where the money is."
Biden's problem is that his administration took the money from those at the bottom, as measured by incomes and assets and put it in the "Bank of the 1%." Now, as the election approaches, he needs to plunder that bank also to fund his budget deficits.
Despite Biden’s rather high decibel economic sophistry, the American public understands what ails them. In a CBS poll conducted last month, 57% of voters rate the condition of the economy as "fairly bad" or "very bad," and 77% of voters say that their own financial situation has stayed the same or gotten worse under Biden.
Moreover, in a recent NYTimes/Siena poll, 43% of voters said that Biden’s policies have hurt them personally, with only 18% answering that his policies have helped. In contrast, 40% of voters judged that Trump’s policies had benefited them personally, with only 25% saying that they had hurt.
At least one Democrat seems to understand the harm that Biden’s policies have wrought. In speaking with the Washington Post earlier this week, Vermont Independent Senator Bernie Sanders remarked, "The bubble is extraordinary: Democrats seem to think — many of them — that, only if we can explain all that we have accomplished, people will come on board. But that ignores the pain ordinary people are now experiencing."
Undoubtedly, Sanders’ big government solutions would only worsen the country’s predicament, but at least he is able to acknowledge the scope of the problem. What ails the American public is not their supposed ignorance of Biden’s "accomplishments." Rather, it’s an acute understanding of the consequences of these policies that has so soured the American mood.
One accomplishment that Biden will not tout is the high interest rates, which will likely further sour the low-income cohort and perhaps younger voters on Biden. Recent data show that credit card and auto loan delinquencies are rising among low-income Americans and the 18-29 age group.
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The Federal Reserve was forced to raise rates at a record pace after the demand shock created by Biden's multi-trillion-dollar spending packages were launched into a supply-contained economy. Biden's signature IRA should be renamed from the Inflation Reduction Act to the Interest Rate Accelerator. Its uncapped spending and unquantifiable subsidies are likely to keep interest rates elevated for an extended period.
In retrospect, "Bidenomics" was a sad, simple and cynical economic plan: spend, spend, spend while opening up the U.S. southern border to unlimited immigration to keep wage inflation down. Biden's profligate spending gave us the Great Inflation of 2021-23; and immigration, according to Federal Reserve Chair Jerome Powell in a recent "60 Minutes" interview, helped contain wage inflation.
Of course, this income suppression was for working Americans – not Biden's preferred upper decile constituents. Imagine the real wage growth that would have occurred for the lower 50% of workers if the post-COVID-19 recovery had been coupled with Trump's border policies.
High interest rates have taken away the dream of home ownership and economic security. Unchecked immigration has taken away working-class wage growth and personal safety. The president's current poll numbers suggest that voters want to banish the three I's to the scrapheap of history and make the economic flogging stop.
