Another election season is upon us, and so it's time for the Curmudgeon to get back in the saddle once again. But this post won't be about politics - at least, not overtly so. True to his roots, the Curmudgeon will take on economic data in this post, setting the record straight, as is his wont. For there's been a lot of misinformation as of late, and the record needs setting straight. As always, we will use hard data to do that.
It's been an interesting three or four weeks, to say the least. First, we had the disastrous debate performance by President Joe Biden, leaving us to wonder just why he insisted on debating his opponent in the first place. That led to a growing chorus of voices calling on him to step aside and let another candidate take his place at the top of the Democrat ticket, as his poll numbers, already flagging, slipped further.
Then, we had the Supreme Court immunity decision that effectively ended much of the lawfare waged against former President Trump, adding to the momentum of his campaign. Less than two weeks later, a would-be assassin's bullet grazed the former President's ear, coming within inches of ending his life, and leaving many questions regarding the Secret Service's security protocols - questions that remain unanswered more than a week later, despite a Congressional committee hearing for which the Director of the Secret Service had to be subpoenaed to appear, only to resign in disgrace a day later.
The following week brought the Republican National Convention, and the announcement of Ohio Senator J.D. Vance as Trump's running mate. These events further solidified the Trump campaign's momentum, and intensified calls for President Biden to step down. In the midst of the RNC, and just two days after the assassination attempt, a Federal judge threw out the classified documents case against Trump, arguing that the Special Prosecutor in that case - who would also preside over other lawfare cases against Trump - was unconstitutionally appointed. Further momentum for Trump.
Finally, three days after the RNC, and just over three weeks after the fateful debate, President Biden announced that he would not seek re-election - ironically forced out of the campaign by the Democrat Party machine that made him the 2020 nominee after forcing then-frontrunner Bernie Sanders aside, and for the same reason: the party machine determined that its frontrunner could not defeat Donald Trump, the will of the voters be damned.
Now, you might say, what does all of this have to do with economics, EC? It's sounding a lot like politics to me. Well, dear reader, read on. This is merely the backdrop. The misinformation, and the economic data that will disprove it, is forthcoming.
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The Misinformation
The initial misinformation came during the debate itself, when President Biden claimed that he inherited an economy that was on the brink of disaster following the covid pandemic, and that he brought America out of the pandemic.
But the catalyst for this post came in the aftermath of President Biden's announcement of his "withdrawal" from the campaign.
A teary-eyed Rachel Maddow - purveyor of more conspiracy theories and misinformation than the Kremlin itself - proclaimed that Biden had brought America from the dark depths of the economic disaster wrought by covid, implying that he took office at the nadir of the pandemic's economic malaise, and lifted the U.S. economy to recovery.
Well, as Col. Sherman T. Potter would say, "Horse-hockey."
Let's look at the data by sector. But before we do, I will, in the spirit of political agnosticism that any economist worth his or her salt should embrace when discussing economics, place blame for the covid shutdown at the feet of President Trump. He allowed Fauci, Birx, et. al. to convince him to allow the states to shut down their economies, the most disastrous policy decision in the history of disastrous policy decisions, a wholly unnecessary move that accomplished nothing in the way of public health but did nearly irreparable harm to the global economy, a move whose repercussions are still being seen in the economic data today. (To be fair, it was a decision - we now know - based on bad science, or no science, from the man who claimed he was science itself.)
There is a constitutional argument to be made that the decision to shut down economies was rightfully a states' rights decision. I would argue that given the gravity of the repercussions, for the good of the Republic, the federal response should have superseded states' rights at the time, something that Fauci, Birx et. al. themselves argued in trying to shut down ALL states. Trump and Pence unwisely followed their bad advice, permitting the calamitous "Two weeks to flatten the curve" lie, which turned into nearly two months, with disastrous results.
As a reminder, covid hit the U.S. in March 2020. The U.S. economy was shut down from mid-March through April, and re-opened in early May. Donald Trump was President at that time. Joe Biden was not even the presumptive Democrat nominee until Sanders was officially pushed out of the race on April 8, and he didn't secure enough delegates to become the nominee until June 5, having finished lower than third in the Iowa caucus and New Hampshire primary. So he had nothing to do with the economy from the time it re-opened in May 2020 until after his inauguration in January 2021.
On to the data.
Employment
As I've noted before, the covid shutdown eliminated nearly 22 million U.S. jobs. Every job gained since then has been recovered, not "job growth." (All 22 million jobs were recovered by June 2022, but that doesn't account for the normal growth that would have occurred had the economy not been shut down; it was growing by about 200k jobs/month prior to the shutdown, with no indication of slowing. Had growth continued at that pace, we'd still be about 4 million jobs ahead of where we are today.)
In the nine months from when the economy re-opened in May 2020 until the end of President Trump's term, about 12.5 million jobs were recovered, or about 57% of the jobs eliminated - and that includes the 243,000 jobs lost in December 2020, when California and New York shut down their economies for a second time. So President Trump got payrolls 57% of the way back to where they'd been before the shutdown.
How long did it take for President Biden's administration to oversee the recovery of the remaining 43% of jobs eliminated? Seventeen months, about twice as long as it took President Trump's administration to get us 57% of the way there. And how long did it take for the Biden administration to oversee the recovery of 12.5 million jobs, a feat the Trump administration achieved in just nine months? Three times as long - 27 months.
Let's look at another employment measure: the unemployment rate. President Biden likes to boast that the unemployment rate today is the lowest in U.S. history. (It's not - at 4.1%, it's not even the lowest in his term; that number is 3.4%, recorded in January and April of 2023. It's risen steadily this year.) But the lowest unemployment rate in U.S. history is 2.5%.
Moving on to the covid recovery numbers: in February 2020, just prior to the pandemic, the unemployment rate was 3.5% and trending lower; it had dropped from 4.0% at the beginning of 2019. (It averaged 7.4% under the Obama-Biden administration, and was 4.7% when Trump took office.) In April 2020, it peaked at a record 14.8% due to the shutdown.
By the time Trump left office, the unemployment rate had dropped to 6.4% - a decline of more than eight percentage points, and lower than the average under his predecessor.
How many percentage points has it declined under President Biden?
Just over two. Three, if you count the lowest point during his term. Again, Trump got us 77% of the way back to where we are now, in just. nine. months.
GDP
From the time he took office until the quarter before the pandemic, GDP growth under President Trump averaged 2.8%. (Under the Obama-Biden administration, it averaged less than 2.2%.) In the first quarter of 2020, which included the normal months of January and (mostly) February, but also the partial shutdown month of March, GDP contracted by 5.5%. In the second quarter, which included the full shutdown month of April (note that some large states like California and New York as well as smaller states like Hawaii and New Mexico remained shut down longer), GDP declined by a record 31.6%.
In the third quarter, with the economy fully open, GDP grew by a record 31%. And in the fourth quarter, it grew by more than 4%.
So President Biden inherited an economy that had already recovered, and was growing at an above-trend pace. And that continued through 2021 (thanks again to Trump - we'll get to that). But by 2022, GDP contracted again, for two consecutive quarters, the textbook definition of a recession (although the administration claimed that the definition had changed). No recession would have occurred under Trump had covid not hit. Yet it took the Biden administration only a year to turn a fully recovered, growing economy into a contracting one.
GDP growth under President Biden has averaged 2.7%, less than under President Trump prior to the covid shutdown (after having inherited the anemic growth of the Obama-Biden era). 2024 Q1 growth was just 1.4%, and Q2 growth is expected to be below 2% again, which will bring the Biden average even lower.
CPI
Now, this is a tricky one. Although President Biden claims he inherited 9% inflation when he took office, he didn't. (For the record, I don't believe he's intentionally lying when he says that. I think he just doesn't have a clue.) He inherited 1.4% inflation, as measured by year-over-year CPI. He created 9% inflation, which was the level of CPI just 15 months after he took office - the highest level since I was in college, and I just qualified for Medicare a few months ago. But let's get back to current inflation in a minute.
The 1.4% inflation that President Biden inherited was attributable largely to the fact that consumption plummeted during the covid shutdown - not so much because people couldn't afford to buy stuff. Sure, those 22 million people whose jobs were destroyed couldn't buy much during the period of time they were out of work. But the jobs came back pretty quickly, and there were trillions of dollars of stimulus payments in the interim.
However, most of the people who lost their jobs were at the "bottom" of the economy. I wrote extensively at the time about how it was a "bottom-up" recession, and predicted - correctly, I might boast - that that was the reason the recovery would be very rapid, and very strong. The people at the "top" of the economy - the highest wage earners - didn't lose their jobs. And many of them received stimulus payments they didn't need, because the income bar the government set for the stimulus payments was set so high.
So those people's incomes weren't affected; in fact, in some cases they were augmented by stimulus - but they still couldn't buy stuff, or travel. Why? Because the stores were closed, the airplanes were grounded, the cruise ships weren't allowed to take passengers, and the hotels were closed, and then re-opened at limited capacity. Some states imposed draconian quarantine requirements - Hawaii even encouraged residents to rat out visitors who violated them, and provided a hotline for them to use, so that the police could round them up. Shades of 1930s Germany or Stalinist Russia.
In any event, when the economy did re-open, and travel resumed, consumption did, also. But remember that CPI is typically measured year-over-year. So consumption in January 2021, when President Biden was inaugurated, was still only up 1.4% over January 2020, when the economy was roaring along under President Trump. In January 2021, cruising was still not allowed, strict quarantine and vaccine requirements were still in place for travel abroad, masks were required on airplanes, some states still had those draconian quarantine requirements in place, and some airlines were still limiting seats - and nearly all airlines had cut routes. There were also lingering supply chain issues that prevented some goods from getting to market.
The point of all of this is that I can't give President Trump too much credit for the low inflation that persisted post-pandemic, when it averaged just 1.1%. So let's look at his record pre-covid: CPI averaged 1.9% during that time. Under President Biden, it's averaged 5.4% - the highest average under any President since Jimmy Carter.
Now, President Biden also likes to say that prices have come down recently. That's also false, and probably just speaks to the fact that he doesn't understand inflation. The rate of inflation has come down, from the 9% peak in June 2022 to the most recent reading of 3.3%. But that still means that prices are up 3.3% vs. a year ago. And that 3.3% increase in prices vs. 2023 is on top of 2023's 4.9% increase, over 2022's 9% increase over 2021 ... get the picture? Prices under Joe Biden are up 20% in total, and his term isn't even over yet (technically). Prices under President Trump only rose 3.9% - and even without the dampening effects of covid, they were only on pace to rise 7.6%.
Interest Rates
As a result of the disastrous policies that led to rampant inflation under President Biden, the Fed has had to tighten interest rates aggressively. (What does this have to do with recovering from covid, you ask? Well, the catalyst for the runaway inflation that was launched in 2021 - and the thing that President Biden claims saved us from covid - was the massive, and wholly unnecessary, stimulus/spending bill he signed immediately after he took office.)
The rate on a 30-year fixed-rate mortgage, as of this writing, is 6.85%, according to Bankrate.com. When President Trump left office, it was 2.65% - a record low. On the average mortgage amount of $330,000, that's a difference in the monthly principal and interest payment of $832 - in other words, your mortgage payment on that median-priced home would have increased by 63%. (And mortgage rates actually peaked at more than 7.8% last October - again, under President Biden.)
Interest rates on everything else are up too, from auto loans to credit cards. And credit card balances are at record levels, because more and more consumers are having to borrow to pay for everyday needs, thanks to prices being 20% higher than they were less than four years ago.
Housing
Finally, let's look at the effect those higher mortgage rates have had on home prices. Home prices in virtually every market in the U.S. have been rising year-over-year, and in many markets, they're at record levels. That's good news if you're a homeowner looking to sell. The problem is that no one can afford to buy.
Prices are rising, because there's no inventory, because no one is selling, because they don't want to buy another home at these mortgage rates. (If you still have a mortgage today, chances are your rate is under 4%.) The only homes being bought are new construction, and new construction is priced on a cost-plus basis.
The most widely-followed national home price index, the S&P/Case-Shiller Index, which tracks 20 major metropolitan markets, is up 7.2% vs. a year ago, and that's unsustainable. Home prices simply shouldn't rise much more than the rate of inflation, since they don't throw off cash flows, unless you're in a market where buildable land is scarce and demand is high. Home prices are up 33% since President Biden took office. And rent inflation is up more than 21% under his presidency, vs. less than 14% under President Trump.
The Vaccine
This one's a little controversial, because many people who support Trump believe the vaccine kills people (which is curious, since Trump is the President responsible for fast-tracking the vaccine and getting it to the market in the first place), while those who oppose him embrace the vaccine - also curious, since the new Democrat nominee (for now), Kamala Harris, once said she wouldn't take the vaccine because it was "Trump's vaccine," and therefore dangerous. But the purpose of this post is not to discuss the merits or conspiracy theories surrounding the vaccine.
President Trump cut through the red tape of the bloated FDA to rush the vaccine into production - remember Operation Warp Speed? Do you think President Biden could have gotten a new vaccine, in response to a previously unheard of virus, into production, approved, to market, and ready for distribution globally in ten months? Heck, he took $7 billion of our money to build 500,000 EV charging stations two years ago, and to date has built twelve. He took another $7 billion to expand internet access to rural areas, and to date ... nothing has happened on that front.
In spite of Vice President Harris' reluctance to take the "Trump Vaccine" in late 2020, immediately after the election she and President Biden rolled up their sleeves and accepted the gift that President Trump made available for them. Then they followed his administration's distribution plan (and even managed to screw that up), and even went so far as to try to mandate the very vaccine that she had urged Americans not to get because it was "Trump's."
Well, she and her boss took credit for it. But it was indeed Trump's vaccine, and he's the one that made it available, which was a big part of the reason for the strength of the recovery in 2021, President Biden's first year in office, because more and more swaths of the economy re-opened on the basis on widespread vaccine availability and adoption.
Conclusion
In summary, Donald Trump - not Joe Biden - engineered the recovery from covid. Let's recap:
- Under President Trump 57% of the jobs destroyed by the shutdown were recovered, with 12.5 million jobs brought back in nine months. It took President Biden three times that long to "add" 12.5 million jobs.
- Under President Trump, unemployment fell eight percentage points from the pandemic peak - again, in nine months. Under President Biden, it's fallen by two percentage points in nearly four years.
- Under President Trump, GDP growth went from -32% to 31% in one quarter, then continued to grow through the end of his term. Total GDP at the end of 2019, the quarter before the pandemic began, was $20.95 trillion. By the time Trump left office, it was about $20.8 trillion. So economic growth had 99% recovered when President Trump left office. A year later, the economy was contracting, and today, GDP growth is less than 1.5%.
- What growth there was in 2021 was due to the widespread availability of the covid vaccine, leading to more and more segments of the economy re-opening. That vaccine was fast-tracked by President Trump.
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