Biden Speaks From His Ivory Tower To Say Economy Is Great

Daily Caller headline: "Biden Suggests Americans Unhappy With The Economy Are ‘Disconnected’ From Reality." Here is what Biden said, according to the article:

    Biden touted a variety of economic statistics during a speech at the Asia-Pacific Economic Cooperation (APEC) summit on Thursday, before acknowledging that the American people feel a “disconnect” between the “numbers, and how people feel about their place in the world right now.” ...

    “The last quarter the American economy grew 4.9%. The highest growth rate in two years,” Biden said during his Thursday speech. “More people in the United States are in the workforce today than any time in American history. Unemployment has been under 4% for 21 straight months. Inflation has come down by 65%, and more to do. I mean, we know have lowest inflation — lowest inflation rate of any advanced economy in the world. Meanwhile, median household wealth has grown by 37% in real terms since before the pandemic.”

    Despite Biden’s repeated touting of the economy, the American people are not viewing this situation the same way. Sixteen percent of Americans believe the economy is getting better while 56% of U.S. adults say the economy is getting worse, according to a September YouGov Poll.

To understand what Biden is saying, keep in mind that GDP is the sum of private consumption + gross private investment + government investment + government spending + (exports – imports)). In other words, it doesn't measure the creation of wealth, it just tallies up the money spent. Thus, if the government is spending like there is no tomorrow (as it is actually doing) then GDP will go up. 

    There are different measures of inflation and it is not clear what measure Biden is referencing. However, I suspect it is Core Inflation which does not include food and fuel costs. So, you might be paying twice as much for gasoline and on your grocery bill as last year, but if the prices of electronics or cars or houses are fairly stable, then the Core Inflation is going to be low. Vox Day has a nice bit on "The Inflation is Real" that you should check out. He cites Karl Denninger who contends that grocery prices are up 30% and auto insurance has gone up 20%. Denninger sees three solutions: we will either have to get use to high inflation numbers, the government is going to have to reign in its spending by 30%, or taxes are going to have to increase by 40%. Day sees a fourth option--one predicted by Peter Turchin's models--civil war and revolution.

    Unemployment is another misleading statistic. Unemployment is the number of unemployed as a percentage of the total labor force. But here is the key point: People who have not looked for work in the past four weeks are not included in this measure. It other words, it doesn't actually measure the number of people out of work because it doesn't include people that have stopped looking for work or never tried finding work. Rather you have to look at labor force participation which, it so happens, is at record lows--particularly for men. And when you dig into the Bureau of Labor Statistics unemployment figures for October 2023, you will notice a couple things: first, unemployment has actually increased a bit since April; and, second, most of the employment being added is in healthcare, government jobs, and social services--i.e., job that do not create wealth. 

    So, if there is a disconnect, it isn't with the general public--they are reading the economy quite accurately--but with the mandarins in Washington D.C. that actually believe their own bloviations.