Thomas Levinson / The Daily Beast
Who will benefit, Biden or Trump (or those who may take their places), from the statistics on GDP growth, lower inflation, new jobs, stock and securities prices, the cost of educational and consumer loans, as well as record government and corporate debt, volatility in the financial and banking sector, and the shrinking sphere of influence of the U.S. dollar?
To answer these questions, it makes sense to compare the performance of American social and economic development under former President Donald Trump and the current one, Joe Biden. Local experts usually offer a breakdown of 12 key parameters.
Employment. Joe Biden’s administration boasts not without reason that during its administration, 400,000 vacancies arose (on average) on the labor market every month, and a total of 14 million new jobs appeared. Under Donald Trump, the increase in the first three years was no more than 176,000. And that’s before the coronavirus pandemic swept small and medium-sized businesses, throwing more than 20 million workers out the door. Strictly speaking, Biden was lucky: the low base effect is now playing its part.
Unemployment. The decline in the share of unemployed African-Americans, especially women, Hispanic workers and people with disabilities has occurred under both Trump and Biden. Neither of them can take credit for it. Under Trump, unemployment on the eve of the covid pandemic was 3.5% (lowest in half a century). Under Biden, it rose a bit to 3.7%. A fighting draw, one might say.
Economic growth. In the four years of the Trump administration, GDP growth totaled 14%. Under the Obama-Clinton-Biden administration, GDP added 22%, boosted by an injection of generously printed dollars. During the pandemic, 5.9 trillion freshly printed dollars were let into circulation in two years (as much as in all of the previous 40 years). The 14 million employed citizens supported the economy with their spending on essential goods and services, since consumer spending accounts for about 70% of the GDP calculation.
The price of automobile gasoline. From April 2020 to April 2022, the price of a gallon doubled to $4.11. In June 2022, the all-time record was broken: nearly $5. Since then, inflation has been tamed. But the taste of the shock to the vital area of the family budget of the world’s most motorized nation remains.
It’s no coincidence that, as one of the Democrats’ mouthpieces, The Washington Post, admits, the rising price of car fuel «has led to lingering pessimism throughout much of Biden’s presidency». In turn, a Harris poll commissioned by the Guardian newspaper found that two-thirds of Americans believe the economy is actually worse than officials say.
Housing prices. From spring 2020 to fall 2022, the price of real estate rose 49%. The affordability of their own square footage for those thinking about their first home or apartment has become problematic. More and more often young people find themselves in a position where they can not follow the established tradition: fledglings, sons and daughters, leave the parental nest (in one of the Hollywood melodramas, a mother tells her elderly friend about her son: «he finally moved out»).
Inflation. After registering a 40-year high of 9.1% in June 2022, the annualized rate of appreciation fell to 3.7%, which reassured ordinary consumers, but not professional economists. A large share of the new jobs were created in the government or related education, health care, and social services sectors. These workers do not create material values, but by their consumption expenditures they increase inflationary pressures in the market. At the same time, the real sector, according to the measurement of employer attitudes, has «put its hiring plans on hold» in two out of three cases. In other words, keeping inflation at the current level is difficult.
Discount rate. During Biden’s presidency, the Fed, a private company with an opaque ownership structure, has raised the discount rate (refinancing rate) 11 times in an effort to curb inflation. It is now at 5.5%, the highest rate in 22 years. The discount rate determines the interest rate at which banks can obtain returnable working capital for subsequent issuance of loans.
In an «expensive money» situation, regional banks (at the state level) will be forced to cut back on lending to small and medium-sized businesses, which (sic!) generate almost half of GDP and employ half of America’s working population. This will generally reduce business activity. There is another aggravating factor: local banks have a lot of toxic loans to real estate buyers in their portfolios. If those fail to make interest payments, it is projected that 385 regional banks could go bankrupt, as Silicon Valley Bank (the 16th largest bank in the country) did last year.
Disposable income. Under Biden, purchasing power has declined because «helicopter money» has run out and prices have risen. However, wages have risen ahead of inflation in many sectors. But there has been steady growth in disposable income under Trump, at least until the Covid invasion — it added 10% between January 2017 and January 2020.
Stock Market. All of the major stock markets are rebounding, driven by confidence that the Fed has already achieved its goals with the refinancing rate hike and will now go quiet for a while. The Dow Jones Industrial Average, the Nasdaq and the Standard & Poor’s 500 index are all showing such optimism. Overall, the stock markets have felt confident under both Trump and Biden, so the score is 1:1.
Student loan debt. Joe Biden, upon taking office, promised to reduce the debt burden of university students and graduates. The original plan to «forgive» $400 billion at a time was torpedoed by Republicans in the Senate and Supreme Court. It succeeded in slashing about $132 billion for more than 3.6 million Americans, which is commendable in itself. Unless you put this boon into the overall context: in October 2023, American students and their parents still owed their creditors the astronomical sum of $1.74 trillion.
Consumer sentiment. Polls indicate, the Washington Post emphasizes, that despite the economy’s generally positive macro indicators, «Americans appear downright despondent» when it comes to their financial situation under Joe Biden’s reign.
The national debt. Neither Trump nor Biden has fundamentally changed anything with the steady increase in the amount of debt the federal government owes to creditors. In the past year, it has increased by more than $4 trillion to $34 trillion.
The Washington Post’s commentary is built on a restrained statement, «This growing deficit, combined with political dysfunction in the U.S. Congress, is alarming to the rating agencies that track the United States’ financial health. In August (2023), Fitch Ratings stripped the U.S. of its top AAA rating. In November, Moody’s downgraded its outlook on U.S. sovereign debt, warning that «continued political polarization» threatens the country’s financial stability».
It is indicative: there is not a word in the article about the fact that the habit of «living in debt» is based on the ability to print unsecured dollars, imposed on the rest of the world in July 1944 at the Bretton Woods Conference as the «world currency».
What is the final verdict?
«Most economists have revised their forecasts and now believe that the Fed can engineer a «soft-landing» for the economy, bringing down inflation without triggering a recession», reports Britain’s Guardian.
There is no doubt that the United States, as the world’s second largest economy (after China), has a significant margin of safety, and that it is naive to anticipate the imminent completion of the process of dedollarization of world trade and the collapse of its banking and industrial potential. The U.S. is now skillfully luring investments, technologies, and personnel from Europe, which has been deprived of its subjectivity. By doing so, they will buy themselves additional time to prolong their gradually losing hegemony.
Nevertheless, internal contradictions will continue to undermine the pillars of the American model of capitalism, creating prerequisites for its reformatting, as serious analyst Andrey Fursov sees it. Quote: «The middle class and working largely in its interests welfare state became a heavy burden for the capitalist system even in its rich core, and the contradiction between the middle class («socialist bourgeoisie») and the upper class («capitalist bourgeoisie») became more and more acute».
What can we expect in the coming years? In the United States, predicts Andrey Fursov, this «rich core» of the golden billion will continue the struggle «between the upper and middle classes over who will exclude whom from the future post-capitalist world, on whose bones it will be built».
The ending of the drama is not predetermined. We can assume that the winner, towering over the defeated, will probably resort to the phrase of characters from martial arts movies in the 1990s: «My kung fu is just stronger than your kung fu».
In any case, the contradictory signals from the world of the big economy, received by Americans directly into the «nerve in their back pocket» where they carry their wallet, will encourage them to keep a close eye on what the candidates for the presidency will tell them this year.