Magnus
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- Jun 22, 2020
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All joking aside, WSJ did a great piece on this.Bad marketing. That’s why he’s hired me.
The Economy Is Great. Why Do Americans Blame Biden?
Inflation is lower, but some won’t be happy until prices come down too. That would be a disaster.
Oct. 18, 2023Although the Biden administration can’t crow about it, for fear of seeming out of touch, the economy is doing remarkably well. Consumer price index inflation over 12 months, which peaked around 9% in June 2022, has lately been running around 3.5%. The unemployment rate, which was 6.3% when Mr. Biden took office, has now been 4% or lower for 22 consecutive months. Job creation is still running well above the rate needed to absorb labor force growth. Consumers continue to spend like mad.
Here’s the problem. While some prices in a modern economy—such as for gasoline and food—do go up and down a lot, most prices only go up. When these prices rise rapidly, we have high inflation, as happened in 2022. When they rise slowly, we have low inflation, as was normal before the pandemic. But the overall price level, which is a weighted average of all prices in the economy, almost never falls.
I said almost never. The price level did fall, quite a bit in fact, during the Great Depression, and briefly during the pandemic recession. It takes a truly sick economy to cause deflation.
Yet the public is down in the mouth about the economy—and they blame Mr. Biden. On one level, this isn’t terribly surprising. When the economy does well, Americans give the president more credit than he deserves; and when it performs poorly, they give him too much blame. The question is: Why is this a time for blame rather than credit?
The problem may be that a lot of the public does not. They long for the lower prices they remember. But they don’t think about the severe recession, or even depression, that might be necessary to get back there.
So what’s a poor policy maker to do? For the Fed, whose decision makers don’t stand for election, the answer is simple: Strive for a soft landing, not for deflation. It will make most people better off and happy about the economy. Besides, that’s the central bank’s legal mandate: to achieve low inflation and high employment.