"Are you better off today than you were four years ago?
In olden days -- before the news was hijacked by men claiming to be women and beer companies trying to impress them, before social media turned anyone with a phone into an expert on everything from viral epidemiology to the battle-readiness of Ukrainian infantry, before the existential question facing American civilization was who hosted which cable television show -- economic competence mattered in electoral politics.
It's a quaint idea now to think that things like wages, inflation, interest rates and the value of your pension savings and other assets are important measures by which those who govern us are judged. But let me interrupt our compelling national conversation for a moment and ask: Is it possible that this ancient curiosity might be poised to make a comeback? Could Ronald Reagan's famous and devastating indictment of Jimmy Carter in 1980 return to cut through our current infatuations?
We can't know what the economic situation will be like in November 2024, but we have plenty of evidence to say that, as things stand, Democrats should be in big trouble if stewardship of the economy counts at all with voters.
Not all economic tribulations can be laid at the government's door. The U.S. economy is a vast, slow-moving entity made up of hundreds of millions of people and businesses, deeply integrated into global markets, and conditions at any one time can be the result of, among other things, large, policy-independent business cycle trends at work over months or years; shocks delivered from abroad; and policy errors committed by independent agencies such as the Federal Reserve.
But government can and does make a difference, and on the three main areas over which it has significant command -- fiscal responsibility, financial stability and economic demand management -- this Democratic administration and its allies in Congress are failing Americans.
The coming debt-limit fight again demonstrates how Democrats place political imperatives above sound fiscal management. Speaker Kevin McCarthy's skillful navigation of the debt-ceiling bill through the House last week exposed who would be really responsible for a costly default.
Republicans aren't clean on this -- they too have been reckless with public finances for years -- but with this bill they have come up with prudent and feasible measures for restraining the fiscal Leviathan while permitting the government to meet its obligations.
Confronted by an eminently reasonable proposal, Democrats are trotting out the usual cliches about ransom and hostage-taking that have worked in the past. "The Republicans are demanding hostage negotiations where they will crash the full faith and credit of the United States," Sen. Chris Coons of Delaware said Sunday.
But who is the real hostage-taker? The party that demands complete capitulation to its demands as the cost of avoiding a financial calamity, or the party that offers a route to a compromise?
The administration's management of the financial system is another strike against the Democrats. The continuing mishandling of the low-grade crisis in the banking sector risks much wider trouble. It took way too long to resolve the problem of First Republic, a zombie bank finally laid to rest by the acquisition of most of its business monday by JPMorgan. Three of the four largest bank failures in U.S. history have occurred in the past two months. The Fed is at fault here -- as it gamely acknowledged last week -- but conflicting signals, unwarranted delays and the unleashing of more moral hazard by the Treasury and other regulators are adding billions in costs to bank insurance and creating renewed uncertainty about the health of the U.S. financial system.
Add to this the durability and extent of inflation. Real wages have fallen every month for two years and are now more than 3% below where they were before Joe Biden took office -- this after three years of steady growth before the pandemic. Market interest rates have edged down from their peaks of last year but only because investors fear a sharp downturn is getting likelier. If you have a floating-rate mortgage or have taken out a car loan in the past year, it's consuming a larger share of your already shrinking real income.
Again, the Fed bears responsibility, but Democrats in Congress and the administration have refused to take inflation seriously. The promotion of spending without regard to fiscal and financial consequences entrenched price pressures throughout the economy. We now face a crucial period in which either real wages will have to retreat further to help get inflation down, or interest rates will need to go even higher.
Democrats think they can avoid accountability for all these economic errors by making the terms of political debate about threats to "democracy." But this record of dismal financial and economic management makes me skeptical of the widely touted idea that Donald Trump can't win next year.
The Trump calculation has always been that voters will accept the evident flaws in the man's character and behavior as the price for turning out a party that is literally impoverishing them. The Democrats have to hope the national conversation never gets back to economics." [1]
1. Free Expression: Trump Could Win if People Vote Their Pocketbooks
Baker, Gerard. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 02 May 2023: A.17.
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