Americans may be richer, but they’re not happier

US household wealth has hit an all-time record of $154.3 trillion.

So what?

“Americans have never been wealthier,” CNN’s Matt Egan reports, and then raises the most common — and least relevant — issue: “Despite the economy’s improving fortunes, the public is not giving the White House credit.”

Why doesn’t President Biden get more credit for the happy state of the economy?

For one thing, presidents don’t have as much influence over the economy as they pretend to; for another, the state of the US economy is not actually all that happy.

It is true that American wealth is at an all-time high, in “nominal” terms — meaning when not adjusted for inflation.

In fact, that record wealth is, in an important way, the result of the destructive inflation of the past several years.

As the purchasing power of the dollar has collapsed at the grocery store or the gas pump, the price of stock shares, houses, and other investment assets has increased.


So “record wealth” is mostly the product of asset-price inflation, not of strong economic growth — real GDP growth for the last year and a half has been only 1.33% per year on average.

Think of it this way: If you have a freezer full of hamburger meat, it would have been worth $4 a pound on the day Biden was inaugurated and it is worth $5 a pound today — that’s a 25% gain, on paper, but you don’t feel any richer: You still have the same freezer full of hamburger, it just would cost more to replace it.

Because of persistent inflation, Americans’ “real” (meaning inflation-adjusted) incomes are taking a beating.

According to just-released Census Bureau data, Americans’ after-tax household income fell by 8.8% last year — the worst drop in more than a decade.

And then there is credit card debt -— which hit a record $1 trillion last month.

That’s why Americans aren’t happier with the state of the economy.

The gains in on-paper wealth are enjoyed mostly by relatively affluent people, people who have big investment portfolios and lots of equity in pricy real estate.

The people who feel the inflation the worst are relatively low-income people who are more likely to rent (they aren’t buying homes with mortgage rates at 7.56%) and spend their paychecks on items that are most vulnerable to violent inflation, such as food and gasoline.

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Inflation in such goods can be self-reinforcing in particularly destructive ways: Grocery prices go up not only because of general food-price inflation but also because of higher prices for diesel and commercial warehouse rents (which have been rising quickly and are expected to keep climbing this year) add to the cost of the overall retail-grocery chain.

New Yorkers without cars are still paying high fuel prices — every time they order from Amazon.

Americans have an odd habit of blaming or crediting the man in the Oval Office for economic developments that are far beyond his control.

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Take the Clinton administration: The economy performed very well in those years, thanks in part to policies adopted by previous administrations (especially the tax and regulatory reforms of the Reagan years) but mainly due to the spread of personal computers and the emergence of the Internet as an economic engine, neither of which was Clinton controlled.

The Biden administration — and the Trump administration before it — has contributed to the current state of the economy by spending wildly on “emergency” priorities long after COVID was a national crisis.

Federal spending in 2022 was 25% of GDP, and it is on track to be almost that in 2023.

That is higher than it has been since 1946 when the United States was still winding down the military mobilization of World War II.

Former Pres. Clinton is credited with helping to expand the economy during his tenure, but the nation's growth was heavily influenced by the kick-start of the Internet and digital culture.
Former Pres. Clinton is credited with helping to expand the economy during his tenure, but the nation’s growth was heavily influenced by the kick-start of the Internet and digital culture.
Getty Images for The Cantor Fitzgerald Relief Fund

When you flood the economy with money, you get inflation.

Some well-off people might feel pretty good about that inflation when it shows up in higher prices for the assets they own, but a lot of less affluent people will suffer when that inflation impacts the things they need.

Joe Biden didn’t create COVID or break the supply chain, but his advocacy of continued high spending levels has contributed to persistent high inflation.

The president probably should think twice about how much credit he really wants for this economy.

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