Bidenomics Equals Stagflation and a Bleak American Future

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Bidenomics equals stagflation.  That’s America’s sober economic reality after more than two and half years of a Joe Biden presidency pockmarked by profligate government spending, soaring interest and mortgage rates, a precipitous loss of strategic energy dominance, a southern border invasion, a new and expensive endless war, and a rapidly expanding trade deficit.

Stagflation is a “tax” crueler than inflation alone, which eats away at our purchasing power.  This is because the “stag” part of stagflation also entails recession or slow economic growth.

As the 2024 presidential election approaches, Bidenomics is conjuring up the ghost of a 1970s stagflation past that ended in a landslide victory by the Republican Ronald Reagan over Democrat Jimmy Carter. In the final 1980 presidential debate, with polls surprisingly close given the grim economy, Candidate Reagan asked the American people “are you better off today than you were four years ago?”  That question – and its obvious “no” answer -- triggered a decisive break in undecided voters to the Reagan camp.

Will this Reagan-Carter past be prologue to a resounding Biden defeat?  The answer to this question must begin with this observation: Biden’s Democrat Party is supposed to be the party of America’s working classes and wage earners.  Yet, American labor is now bearing the heaviest burden of Bidenomics.

This burden is most evident in the (mostly) downward trajectory of “real wages,” which measure actual or nominal wages adjusted for inflation.  When inflation is rising faster than nominal wages, real wages are falling along with workers’ purchasing power. 

This is what is astonishing: Of the roughly 900 days Joe Biden has been in the White House, real wages have fallen for almost 700 days – about 75% of Biden’s time in office.  All total, the collective drop in real wages has been 3% rather than the robust real wage gains workers deserve and expect. 

Against this backdrop of falling real wages, energy prices have skyrocketed. From truckers and Uber drivers to commuters and flyover country ranchers and farmers, the pain of a nearly 50% rise in gasoline prices has spread far and wide.  Meanwhile, its bundle up time in people’s own homes as home heating oil has jumped 36%.

In the Marie Antoinette “let them eat cake” category, Bidenomics has also delivered a 16% increase in milk prices, a 25% increase in beef prices, and a whopping 82% increase in egg prices.  As for “gimme shelter,” home prices have risen 32% while rents have risen 15%, and it now costs 21% more to keep the electricity on. 

So how has “capital” fared compared to “labor?” A bit better but not exactly good.  Here, any lag in capital performance is important not just to Wall Street.  America’s Main Street pension systems need robust market returns to stay solvent over time.

Since Biden’s inauguration, the S&P 500 index, the broadest measure of capital performance, has risen 16%.  While that may sound robust, this single digit annual improvement lags behind the historical double-digit annual average of the last 20 years.  It’s far worse for the tech-laden NASDAQ; its return has been nearly flat in the Bidenomics era (about 2%).

It should be no surprise why Bidenomics is failing.  Its primary strategy is grounded not in sound economics but rather cynical politics.  Biden and the Democrats will deliver a massive (and massively excessive) multi-trillion-dollar Keynesian stimulus in the months leading up to the 2024 election.  They hope to buy off large swathes of the electorate with a short run fix of “good times.”

This political ploy may work – stay tuned.  But at what cost? 

Currently, the US has a “debt-to-GDP ratio” of about 120%.   This level is already unacceptably high – an ideal level is below 50%.  However, with the Bidenomics over-stimulus packages set to help drive the national debt to about twice the size of the US economy over the next 30 years, America’s debt-to-GDP ratio is projected by the Congressional Budget Office to rise to nearly 200% by 2050.

Why does this particular yardstick matter?  Because any country’s debt-to-GDP ratio measures the ability of its taxpayers to fund essential government services ranging from infrastructure, education, and healthcare to national defense, social security, and Medicare.  

In this case, as Bidenomics and stagflation drives up the debt and slows GDP growth, more and  more of America’s tax dollars will be spent servicing our national debt and less and less will be spent on serving the American people.

In these ways, Bidenomics not only equals stagflation.  It guarantees a bleak economic future for young and old Americans alike and a significantly diminished ability to provide for our education, health care, transportation, and national defense needs.

Peter Navarro served in the Trump White House as President Trump’s manufacturing czar and chief China strategist.