After a four-year economic bacchanal, America was left with a cost-of-living crisis. Runaway government spending and overregulation are driving up prices for many essentials at breakneck speed, including doubling the cost of homeownership. Fortunately, the Trump administration has reversed the damage and paved the way for an American comeback this year.
It is no exaggeration to say that President Joe Biden has left behind an economic mess, including a real affordability crisis. Consider the following six data points that show what happened during his tenure:
- Monthly mortgage payments on a median-priced home have more than doubled.
- The inflation-adjusted value of the average American’s weekly paycheck fell 4%.
- Native Americans lost jobs, while net job growth went to foreign-born workers.
- The cost of servicing the national debt exploded by 117%.
- The number of bureaucratic government jobs has exploded by more than 160,000 in two and a half years.
- Annual deficits of many trillions of dollars were written into law.
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Biden’s runaway spending and a profligate Congress crushed the American dream with four decades of high inflation, the fastest interest rate rise in as long, a frozen housing market and more. The irony is that the first effect of all this government spending was to make the economic numbers look better or make consumers feel better temporarily.
When the Biden administration repeatedly fired the money cannon through “stimulus payments,” people thought their personal financial situation had improved because they had more money to spend. But all that money was chasing the same amount of products and services in the economy, so everyone quickly bid prices everywhere.
Likewise, every dollar the government spent added to gross domestic product (GDP), a measure of economic activity. Runaway government spending, financed by borrowing printed money, made GDP look great until predictable inflation arrived and robbed wage earners of their savings and income.
The same happened with the labor market. Every government bureaucrat hired under Biden increased the monthly jobs report but added no output to the real economy. Likewise, every illegal alien hired increased payrolls without hiring more Americans. It wasn’t economic health, but more of a cancer.
Last year, President Donald Trump’s economic agenda resembled a shock treatment of chemotherapy to kill Bidenomics’ cancer. The Trump administration has cut back more than a quarter of a million government bureaucrats, reducing the federal workforce to its lowest level in more than a decade. The deficit is 27% lower than last year. And immigration laws are actually enforced.
These types of changes are obviously good in the long term, but can lead to pain in the short term, like chemotherapy that eliminates a tumor but initially makes a patient feel worse. Cutting all those duplicate and counterproductive federal jobs will drive down payroll in the monthly jobs report. Similarly, the contraction in government spending in the first half of last year reduced the headline figure in GDP reports.
It may be tempting for the government to simply spend more money and hire more bureaucrats to make GDP and payroll figures look better, but that is not the path to long-term economic health. Fortunately, President Trump resists that temptation.
Just as thankfully, the pain is almost over. Cutting government spending has put downward pressure on inflation, causing profits to rise faster than prices. The average American’s weekly paycheck today could earn 1.6 percent more than when Biden left office.
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And there’s more good news in the job market for Americans. All of the net job growth over the past twelve months has gone to native Americans, not foreign workers. Furthermore, all net job growth comes from the productive private sector, not the government.
There has even been some relief in the housing market, with monthly mortgage payments for a median-priced home falling by almost 5%. Like the increase in inflation-adjusted weekly earnings, this improvement in the housing market has clearly not undone all the damage from Biden’s term. The affordability of home ownership is still at a record low.
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But things are moving in the right direction and will accelerate this year thanks to the Trump administration’s pro-growth agenda. Tax reforms, including no tax on tips or overtime, and full operating expenses, will encourage work and investment. That will boost growth and wages for people in all income groups.
The economic cancer created during the previous administration was certainly great and far-reaching, but chemotherapy is mercifully nearing its end. Once the old, failed government policies are out of the system, the productive private sector economy can start running at a healthy pace by 2026. Cheers for that in this new year!
