Why Biden ‘success’ leaves America cold

Something doesn’t add up about the Biden economy.

Official figures show it grew at 5.2% in this year’s third quarter, the highest growth rate the US economy has seen in nearly two decades.

Yet the voters are deep in pessimism, with two-thirds rating the economy as “poor” or “not good,” and the same number saying that it’s gotten worse in the past two years.

This aligns with Gallup polls showing economic confidence lower than it’s been since early 2008 when the country was facing down the Great Recession.

We’d be wrong to dismiss this consistent pessimism just because the official GDP numbers tell a different story.

Crucially, unofficial private-sector surveys of the economy show the same weaknesses that voters feel in their bones.

They show, for example, that the US manufacturing sector has been contracting since 2022; the services sector is expanding, but remains very weak.

Consumer confidence is in a ditch, registering readings lower than in the Great Recession.

Why do the unofficial metrics look so different from official ones?

I suggest the growth numbers are being propped up by the Biden administration’s out-of-control spending, which does not benefit most Americans.

Per the Committee for a Responsible Federal Budget, the deficit is set to explode to around $2 trillion in 2023.

Some of this is due to higher payments on federal debt as interest rates rise.

But much of it comes from President Biden’s enormous signature spending bill, the 2022 Inflation Reduction Act, outlays totalling $891 billion, mostly targeted at green energy.

Keynesian economists (presumably the bulk of the Biden team) do endorse large-scale debt-funded government spending — but only when inflation is low and unemployment is high.

The IRA, however, dumps enormous amounts of money into an economy that is so hot that the Federal Reserve is jacking up interest rates to cool it.

Economists would typically say that this is a case of fiscal policy (government spending) and monetary policy (Fed interest rates) working against one another and would counsel against it.

But due to the fierce partisan divide (i.e, a fear that airing their concerns in public might help Donald Trump win), few economists seem willing to speak up.

In the ’80s film “Weekend at Bernie’s,” two insurance workers pretend that their dead boss is still alive, resorting to ridiculous measures like physically propping up his corpse and manipulating his limbs.

This is basically what the IRA is doing to the American economy.

On every normal measure, the economy looks like it should be stagnating or even tipping into recession, but the Biden IRA gives it an illusion of life.

The “Weekend at Bernie’s” economy explains why most Americans are not experiencing the official growth, which is confined to a small segment of insiders, especially those with government connections and “green” credentials who can tap into the IRA clean energy gravy train.

Look at a map of where the clean energy investments are being made: largely on the East Coast, with some fanning out to the adjacent states — but once we move further out from DC, past Indiana and Michigan, the investment peters out.

Can the IRA prop up the economic corpse from now until the election next year?

Possibly, but the polling suggests that the American people aren’t buying it.

Philip Pilkington is a macroeconomist and investment professional.