The Biden Boom: ‘It’s Morning In America’ According To The Economic Data

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In 1984, Ronald Reagan began his reelection campaign with his Morning In America television campaign ad. It was a successful attempt to gloss over his dismal economic record. Reagan’s Recession:

The deepest post-World War II economic downturn occurred in the early 1980s. According to the accepted arbiter of the economy’s ups and downs, the National Bureau for Economic Research, a brief recession in 1980 — lasting only six months — and a short period of growth, were followed by a sustained recession from July 1981 to November 1982. The unemployment rate hovered between 7% and 8% from the summer of 1980 to the fall of 1981, when it began to rise quickly. By March 1982 it had reached 9%, and in December of that year the unemployment rate stood at its recession peak of 10.8%. The jobless rate slowly receded over the next few years, falling to 8.3% by the end of 1983 and to 7.2% by the 1984 presidential election. The unemployment rate did not fall below 6%, however, until September 1987.

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In the spring of 1981, shortly before the onset of the painful recession, most Americans were optimistic about their economic future. A Gallup survey at the time found that 48% of the public believed the financial position of their household would be better in the next 12 months. Another 35% believed it would stay the same, while only 15% thought it would get worse. The public also smiled on the newly elected president. In a May poll, nearly half of Americans said the Reagan administration’s economic policies would make their family’s financial situation much better (8%) or somewhat better (41%). Just 37% said Reagan’s policies would make their family finances worse.

A year later, in September 1982, with the unemployment rate at 10.1%, most Americans were far from pleased with the state of the economy. A 54%-majority said Reagan’s policies had made their personal financial situation worse; just 34% said the policies had made their situation better. But even as the economy reached its nadir, the public did not lose all confidence in Reagan: In an October survey, a 40%-plurality said that over the long run the president’s policies would make their economic situation better, while a third said they would make things worse and 15% volunteered they would stay the same.

Even as the jobless rate remained above 10% and the public experienced added economic pain, those predicting improvement in their finances greatly outnumbered those who anticipated a further weakening. In November 1982, more said their financial situation had gotten worse (37%) than better (28%) over the last year, but Americans believed their personal financial situation would improve over the next year by a 41%-to-22% margin. In March 1983, nearly half (46%) said their personal financial situation had gotten worse in the past 12 months, but the better-to-worse margin for the year ahead remained 45% to 22%.

As Andrew Kohut noted in a special to the New York Times, the rising unemployment paralleled a rise in disapproval of Reagan’s job performance. By the summer of 1982, only 42% of Americans approved of the president. Reagan’s approval would eventually hit a low of 35% early in 1983. In September 1982, when the public was asked by Gallup whether Reagan was correct to argue that his economic program needed more time or that Democrats were right in asserting that budget deficits and high unemployment were signs he had failed, half of Americans sided with the Democrats while 43% agreed with the president. A year and a half into his presidency, only 36% of Americans wanted Reagan to run for reelection at the end of his first term, while 51% said they would rather he sit the election out. Of course, the economy eventually did rebound, and so did Reagan’s poll numbers.

Sound familiar? By the way, Ronald Reagan was reelected in a landslide election in 1984.

The high unemployment rate was largely due to Reagan’s fiscal policies imposing high interest rates to bring down runaway inflation.

When Reagan entered the Oval Office in 1980, he inherited an economy struggling with a decade of runaway inflation. In January 1980, inflation was 13.9 percent. By April, it had increased to 14.8 percent. Inflation fell to 4.32 percent by 1984, in part because the Federal Reserve increased interest rates (prime rate peaking at 20.5% in August 1981). Much of the credit for the resolution of the stagflation is given to two causes: a three-year contraction of the money supply by the Federal Reserve Board under Paul Volcker, initiated in the last year of Carter’s presidency, and long-term easing of supply and pricing in oil during the 1980s oil glut. (Following the oil pricing shock of the 1979 Energy Crisis). See, Reaganomics.

By way of comparison, the annual inflation rate for the United States is 7.0% for the 12 months ended December 2021 — the highest since June 1982. This is entirely due to the supply chain disruptions from a once in a century global Coronavirus pandemic and pricing reflecting that supply chain disruption and shortages. It’s temporary.

The Federal Reserve just announced that it will modestly begin increasing historically low interest rates in March to check inflation. Federal Reserve points to interest rate hike coming in March: “The Fed’s policymaking group said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming. It would be the first rise since December 2018.”

The current uemployment rate is only 3.9 percent, “pointing to a sustained recovery in the job market helped by a fast-recovering economy and strong demand for labor. The rate is still slightly above pre-crisis levels amid reports of severe labor shortages, but should decline further in the coming months as companies fill widespread vacancies.”

For those of you too young to have been working adults in the 1970s and 1980s, life today is pretty damn good by way of comparison to what those of us in my age group experienced. Apparently we were made of sterner stuff. Quitcherbitchin. The economic impact of the global Coronavirus pandemic shows signs of easing, and it really will soon be Morning In America.

 

Reuters reports, U.S. economy likely regained steam in Q4, 2021 growth seen best in 37 years:

U.S. economic growth likely accelerated in the fourth quarter as businesses replenished depleted inventories to meet strong demand for goods, helping the nation to log its best performance in nearly four decades in 2021.

Growth last year was fueled by massive fiscal stimulus as well as very low interest rates. The momentum, however, appears to have faded by December amid an onslaught of COVID-19 infections, fueled by the Omicron variant, which contributed to undercutting spending as well as disrupting activity at factories and services businesses.

The Commerce Department’s advance fourth-quarter gross domestic product report on Thursday would support the Federal Reserve’s pivot toward raising interest rates in March, and diminish prospects of more spending by President Joe Biden’s government.

Fed Chair Jerome Powell told reporters on Wednesday after a two-day policy meeting that “the economy no longer needs sustained high levels of monetary policy support,” and that “it will soon be appropriate to raise” rates.

According to a Reuters survey of economists, GDP growth likely increased at a 5.5% annualized rate last quarter. That would be a jump from the 2.3% pace in the third quarter.

Estimates ranged from as low as a 3.4% rate to as high as a 7.0% rate. But the survey was conducted before the release on Wednesday of data showing a record goods trade deficit in December and a surge in retail inventories.

The strong retail inventory accumulation led economists, including those at JPMorgan, to raise their GDP growth estimates to as high as to a 7.5% rate.

For all of 2021, growth is estimated at 5.6%, which would be the strongest since 1984. The economy contracted 3.4% in 2020, the biggest drop in 74 years [under Donald Trump].

The sharp rebound in growth last year could offer some cheer for President Biden whose popularity is falling amid a stalled domestic economic agenda after the U.S. Congress failed to pass his signature $1.75 trillion Build Back Better legislation. [Because of these two Vichy Democrat collaborators with the Sedition Party.]

ALL ABOUT INVENTORIES

Inventory investment is expected to have accounted for the bulk of the increase in GDP growth in the fourth quarter. Businesses had been drawing down inventories since the first quarter of 2021. Spending shifted during the pandemic to goods from services, a demand boom that pressured supply chains.

JPMorgan estimated that inventories grew at a $167 billion rate last quarter after adjusting for inflation.

Excluding inventories, GDP growth likely increased at a rate of about 2.5%. [Average growth for many years now.]

Growth last quarter was also seen lifted by a jump in consumer spending in October before it retreated considerably as Omicron spread across the country. Consumer spending, which accounts for more than two-thirds of economic activity, has been hampered by shortages of motor vehicles and other goods. A global chip shortage is hurting production.

Reduced households purchasing power, with inflation way above the Fed’s 2% target, also hindered consumer spending at the tail end of the fourth quarter.

“It appears that Omicron is doing meaningful damage to the economy this quarter,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “The good news is that daily confirmed COVID-19 cases in the U.S. are declining, and if this is sustained, the worst of this wave’s hit to growth could be behind us.”

If it wasn’t for the pro-Covid, anti-vaxxer Trump Death Cult in this country that refuses to get vaccinated, sabotaging the country’s recovery from the Coronavirus pandemic, we would already be on the other side of this pandemic crisis. Blame these nihilistic saboteurs, not Joe Biden. He has given you everything you need to fight the virus, and yet you imbeciles bite the hand that helps you.

The Omicron-driven outbreak in infections has also impacted the labor market, with first-time applications for unemployment benefits vaulting to a three-month high in mid-January.

Data from the Labor Department on Thursday is likely to show initial claims for jobless benefits dropped 26,000 to a seasonally adjusted 260,000 during the week ended Jan. 22, according to a Reuters survey. [Good call: “In the week ending January 22, the advance figure for seasonally adjusted initial claims was 260,000, a decrease of 30,000 from the previous week’s revised level.”]

Support to GDP growth last quarter also likely came from business spending on equipment, which is expected to have rebounded after being held back in the July-September period by shortages of trucks.

Trade was probably a drag on GDP growth for a sixth straight quarter, while the housing market likely regained its footing after contracting for two consecutive quarters. Still, the sector remains constrained by expensive building materials, which has resulted in a record backlog of homes yet to be built.

Despite the anticipated soft patch in the first quarter because of challenges from the never-ending pandemic, the worst inflation in decades, supply chain bottlenecks and upcoming interest rate increases, the economy is expected to soldier on this year, with growth estimates as high as 3.9%.

“We see the economy continuing to grow above its natural speed limit through this year amid still-solid demand, a need to replenish severely depleted inventory levels and manufacturers’ obligation to meet record levels of backlogged orders,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.

Paul Waldman writes at the Washington Post, Strong economic growth wrecks the GOP’s gloom-and-doom spin:

On a day when some truly remarkable data on economic growth was released, let’s give Republicans credit for one thing: They might not be very good at making policy, but when it comes to shaping the debate, their [propaganda] skills are unparalleled.

Start with the data: The gross domestic product grew at an annualized rate of 6.9 percent in the fourth quarter of 2021, and for the year, growth was 5.7 percent.

That’s not just good; it’s positively spectacular, exceeding every forecast. It’s the highest GDP growth since 1984, which is remembered as a moment of boundless prosperity.

While predictions can always be wrong (and often are), the International Monetary Fund now forecasts that growth will slow to 4 percent in 2022 — which would still be the highest growth in two decades, excepting 2021.

Then there’s the jobs picture: In 2021, more than 6 million jobs were created, the largest number of any year on record. The unemployment rate plummeted faster than anyone expected; it’s now at 3.9 percent, and pretty much anyone who wants to can find a job.

[T]he party out of power always has an impulse to say that whatever is good about the economy can’t possibly be attributed to the president, while anything bad about it is definitely his fault. There has also long been a partisan gap in perceptions of the economy: Under a Democratic president, Democrats are more likely to say things are good and Republicans are more likely to say things are bad, and the reverse is true under a Republican president.

But what used to be a gap in perceptions has turned into an absolute chasm. And that in turn has warped the entire debate around the economy. What’s remarkable about this moment is how successful Republicans have been in convincing so many people not just that Biden shouldn’t get any credit for the things that are going well, but also that the economy in general is just a disaster.

Um, Paul, have you watched the Fox propaganda network? 42% of this country is hermetically sealed inside a right-wing media bubble that feeds them lies and disinformation and conspiracy theories all day long. It is a poison that is killing them, quite literally, with the nihilistic pro-Covid, anti-vaxxer ravings at Fox. Study Finds More COVID-19 Cases Among Viewers Of Fox News Host Who Downplayed Pandemic.

And right now, the Republicans in that survey give lower marks to the economy than they did at the worst points of the Great Recession in 2008 or the pandemic recession in 2020, when the economy was contracting and bleeding millions of jobs a month.

That is positively bonkers. It’s not remotely rational. Yes, inflation plays a big part in our perceptions of the economy [inflationary psychology] — unlike GDP and job growth, it’s visible to everyone in a day-to-day way. But no sane person could actually say the economy is worse off now than at those moments of outright catastrophe.

Yet Republicans do. Their elected officials and media figures say it, and the rank and file follow right along. This is Biden’s economy, so it’s obviously a nightmare of suffering and woe. You had to pay an extra 50 cents for a gallon of milk? It’s worse than the Great Depression!

This in turn has a distorting effect on media coverage. What we hear from Democrats is “We’re all concerned about higher prices, but if you look at the numbers, in many ways things are actually quite positive,” while what we hear from Republicans is “Chaos! Disaster! Calamity! It’s the worst thing any of us has ever lived through!!!” [Not even close.]

News media take their cues from what partisans are saying. By now, you’ve probably seen a hundred news stories about people coping with inflation, which only reinforces the perception that it’s making everyone miserable, whether or not it has had a significant effect on your own life. [This is reckless Inflationary Psychology] Prices are a very important part of the economic picture, but that coverage makes it seem as though they’re the entirety of the picture.

Which is why it’s always important to remember that there’s an alternate history of the pandemic we avoided, one in which the government didn’t act as aggressively as it did. Would we be better off right now if inflation were at 2 percent but tens of millions more Americans were out of work, hundreds of thousands more businesses had gone bankrupt, and state and local governments had made brutal cuts to services?

The fact that we live in this reality and not that one is a bipartisan success story: The strategy of responding by pouring money into Americans’ pockets and shoring up businesses began when Trump was president, with the cooperation of both parties. Trump signed five coronavirus relief bills that passed overwhelmingly; then came the American Rescue Plan, which was passed only by Democrats and signed by Biden.

So yes, inflation is a real problem (and a global one). But in other ways that are equally or even more important, the economy is doing surprisingly well. We shouldn’t let Republicans fool us into believing otherwise.





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