By: Douglas Carr – nationalreview.com – December 30, 2024

And what Republicans should be cautious to avoid.

Kamala Harris’s campaign did not get a boost from superficially positive economic statistics. Beneath the headlines, many Americans are experiencing financial distress. Under Bidenomics, the percentage of Americans whose finances worsened in the last year is near record levels previously seen only in severe recessions, a millstone for candidate Harris to bear.

More American families are worse off than a year ago by 19 percentage points! (This difference is increased by a University of Michigan methodology change, but it is still unprecedented outside recessions.) This hardship is especially severe for young Americans. Generally young adults ages 18 to 35 see their financial situation steadily improving, but, as shown in the chart below, their financial situation compared with a year ago is near its lowest ebb relative to their parents and grandparents (ages 55-plus), equivalent only to deep downturns.

Much election analysis has depicted the partisan political divisions between college degree holders and others. The chart compares the financial condition of college degree holders with those whose education ended in high school.

In the last year, the financial well-being of the high school–educated versus college degree holders has fallen to the lowest point in a half century or more. Economic distress is tragic for these families and for the nation, especially given the economic head start provided to the Biden administration, as the U.S. powered out of the lockdown era. As illustrated below, in the six months of pandemic recovery preceding the Biden-Harris inauguration, U.S. GDP grew at the fastest rate for which there is modern data, likely the fastest rate in a hundred years at least, going back to the Depression of 1920–21.

Despite this unprecedented momentum, Biden and Harris have never come back to the pre-pandemic trend of private-sector jobs, as shown in the following chart.

The jobs shortfall as of October totaled 5.6 million. Unemployment is low, but that is due to declining labor-force participation.

The most distinctive characteristic of Biden policies is the outsize level of government spending and borrowing, even following recovery. From 1947 to the Biden administration, the federal government’s primary deficit (before interest payments) averaged 0.3 percent of GDP. The Bidenomics average is 5 percent. The primary deficit is of particular economic importance as it represents how much money is being drawn by the government from financial markets and spent in the real economy, as opposed to just being recycled back into the financial markets to pay interest. This fiscal imbalance contributed to the biggest Bidenomics story, inflation, which rose 20.1 percent from inauguration through September 2024 as opposed to 7.1 percent and 4.3 percent in the comparable Trump and Obama periods. Since the Great Financial Crisis, inflation has corresponded closely with primary government deficits as represented below.

This burst of prices caused real incomes after inflation to drop, explaining the financial distress in the early charts. Below is a comparison of weekly earnings adjusted for inflation to this point in recent presidential terms.

After inflation, average earnings have sunk 3.1 percent under Bidenomics, a dismal performance compared with 7.8 percent and 4.4 percent growth in the recent Trump and Obama terms. Administration advocates state that real earnings have picked up in the last year, which is true, but the recent increase is inadequate to offset the prior three years. Similarly, real per capita income has grown, but much of this is explained by a 33 percent increase in the number of people who hold multiple jobs.

The decline in living standards caused by inflation is especially grievous for lower-income Americans. According to the Brookings Institution, “Inflation has systematically eroded the purchasing power of all families in recent decades. It turns out that the effects of rising prices have been even more pronounced for poorer families, and especially families of color.” This study shows that lowest-quintile Hispanic households saw their income decline 9 percent between 2019 and 2022 after adjusting for their spending patterns.

The Consumer Price Index was used to account for inflation in the earnings figures above, reflecting the total cost of living including housing with the biggest weight, higher than does the Federal Reserve’s targeted PCE inflation measure. Housing has seen the greatest impact from Bidenomics. Between home price inflation and interest rates elevated by inflation, housing is at its least affordable level in a generation, as measured by the Atlanta Federal Reserve, shown below.

Most young people today, no matter their class or race, can’t afford to launch their lives in a home of their own. Along with the widespread financial distress noted earlier, this is a sad, certainly unintended, consequence of the budget-busting policies of Bidenomics.

Financial distress for the working class and the unaffordability of homes for young adults had the expected effect on the recent election. Associated Press VoteCast data provide the following breakdown of the election.

The shift in youth vote from 2020 to 2024 of 4.5 percentage points more than explains the expected two percentage point difference between Trump and Harris, and the 11.5 percentage point increase of minority vote for Trump accounts for much of this. Of course there were, as alluded to above, many reasons for Harris’s defeat — and economics isn’t everything — but the headwinds created by Bidenomics meant that Kamala Harris faced more of an uphill struggle than was appreciated at the time.

Republicans should heed the negative effects of bulging government deficits on inflation and interest rates and the consequent negative impact on voters, or their slender majority will vaporize. Democrats should recognize that sound, orthodox fiscal policies, as they followed in the Clinton years, are essential to economic and thus electoral success.

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Source: Bidenomics Sank Kamala Harris Campaign | National Review