We’ve been told by virtually every major media outlet that we are now in a soft landing, that inflation has started to decline, that the economy continues to sail along.
But nobody is feeling like that.
This has been the big, perplexing question for Democrats. Why is it that the economy is so amazing, but nobody actually feels like the economy is so amazing?
One reason is that, contrary to popular opinion, we have not yet defeated inflation. Just yesterday, the Wall Street Journal reported:
Stubborn inflation pressures persisted in March, derailing the case for the Federal Reserve to begin reducing interest rates in June and raising questions over whether it can deliver cuts this year without signs of an economic slowdown.
The consumer-price index, a measure of goods and services prices across the economy, rose 3.5% in March from a year earlier, the Labor Department said Wednesday. That was a touch higher than economists had forecast and a pickup from February’s 3.2%. So-called core prices, which exclude volatile food and energy categories, also rose more than expected on a monthly and annual basis.
This drove the stock market down roughly 500 points. It also meant that bond yields started to go up.
The bottom line is that inflation continues to run almost twice what it is supposed to be running. Year over year, the inflation rate is supposed to be about 2%, and it’s currently running at 3.5%. When that is added onto the giant inflationary bubble from 2021 and 2022, prices are up roughly 20% for most Americans.
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Joe Biden’s economy has not made up those wage losses. Politico is sounding the alarm:
President Joe Biden has been presiding over a good news economy for the past year, with strong growth, low unemployment and falling inflation.
But that good news is reaching its limits.
The cost of living rose faster than expected in March, with prices up 3.5 percent from a year ago, according to the latest consumer price index report. And that likely means that Biden will have to live with high interest rates well into an election year, with investor hopes fading fast for a Federal Reserve rate cut in June.
The Federal Reserve has kept those interest rates pretty high by at least the last ten years of standards. That means money is less easy. That means IPOs are less easy. Finding money to actually fund your start-up is less easy. Loans are not as easy to come by.
Typically, that presages some sort of economic slowdown; when interest rates are increased, inflation is supposed to come down — but markets are also supposed to be impacted. An interest rate increase is supposed to drive down prices. That’s the purpose of the interest rate increase: to drive down prices. And that usually comes along with an economic cooling.
But if the economy is super-heated, that does not happen, and we’ve poured so much money into the economy in 2020, 2021, 2022, and 2023, that the economy doesn’t seem like it’s going to slow down anytime soon.
You can make the case that it used to be supply chain problems that had driven the prices to exorbitant highs, but the supply chain problems — even though they’re still there in places like the Red Sea — are not nearly what they were during the pandemic. Yet inflation rates are still clocking in far too high.
Even CNN is admitting inflation is moving in the wrong direction, noting the latest consumer price report shows prices up 3.5% over the same period last year.
Larry Summers, the former treasury secretary under Bill Clinton, previously predicted there would be a massive inflationary cycle after 2020. People laughed at him because we hadn’t had a massive inflationary cycle in the United States for 40 years. But he was right.
Everybody is feeling it. Consumers are not confident in their ability to make on-time debt payments because interest rates are so high; if you get behind on your bills, it is very difficult to repay all of that.
All of this is very bad for Biden. When a connection is made between a staggering economy with a completely atrocious foreign policy and a president who is no longer with us, that is a bad indicator for a reelection effort.