Workers have much to celebrate this Labor Day. Unemployment is near its lowest level since the 1960s, and real wages are growing again. Post-pandemic inflation is finally under control, even if it’s not yet all the way back to normal.
Barring another crisis, there will be a soft landing from the pandemic downturn.
This is fantastic news, and President Biden has quickly taken credit for it under his Bidenomics umbrella. He, along with Republicans, deserves more blame than credit, however. Neither Biden nor Congress have much control over inflation, and their massive bipartisan spending binge is doing more harm than good for working families.
It helps to think of today’s primarily healthy economy as the third act of a three-act story. In the opening act, a mostly healthy economy was humming along, much like it is now.
In the second act, the pandemic shut everything down.
We are now in the third act, when things are getting back to normal.
The economy is mostly healthy now because the pre-COVID economy was healthy. As in previous downturns, there was no savings and loan scandal, no housing bubble, and no financial crisis. A strong economy closed down, then opened back up. Politicians shouldn’t take credit for that.
If anything, the re-opening was needlessly complex because Washington overreacted. An iron law of economics is that when you print a bunch of money, you will get inflation. In the first two years of the pandemic, the Federal Reserve grew its balance sheet by nearly $5 trillion, more than doubling in size. That unprecedented monetary stimulus is the leading cause of the inflation we’re still dealing with.
The Fed’s monetary overkill doesn’t let Biden or Congress off the hook. One could argue some new spending was necessary for relief payments and vaccines. But most of the trillions of dollars spent under the CARES Act, the Infrastructure Investment and Jobs Act, and the CHIPS Act had little to do with the pandemic. All this spending made the Fed’s job harder, as it more or less has to help finance the political branches’ deficit spending.
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