Today’s entry: @brianmuddradio I get why Biden is trying to pretend we’re not in a recession but why is it so many alleged financial gurus are playing along? Is it all politics for them too?
Bottom Line: While I fashion myself as a pragmatist, and a realist who errors on the side of optimism, there are times when the cynical approach – is the appropriate one. In the case of the politics of economists, skepticism is very much warranted. And for multiple reasons. As the US economy is shown to have had two consecutive quarters of economic decline today, we are literally in a recession. As I’ve recently illustrated there is a literal textbook definition of one and for a quick refresh it's this:
- a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
And for good measure, in all previous ten occurrences in which we’ve had two defined two consecutive quarters of negative economic growth it’s been defined as a recession. You’ll hear arguments about employment levels and business inventories, yada, yada but none of that is a) part of the definition of a recession and b) is the least bit relevant here. Why? Because as I’ve depicted, the first reality is that employment levels are still below the pre-pandemic record in February of 2020 (except in Florida where we’re now essentially back to where we were then). Unemployment rates are as low as they are because more people have dropped out of the workforce altogether – which is anything but a positive economic catalyst. And secondly, you’d need a few million new jobs being added per month, as opposed to a few hundred thousand, to make up for the devastation caused for the average family due to the impact of 41-year high inflation. With consumer inflation at 9.1% and average income growth of 5.1%, the average household is a full 4% worse off than a year ago. Against that context, any economist who is trying to redefine what the definition of a recession is, isn’t just being disingenuous – by attempting to move the ball on what one actually is... They’re intellectually full of poo. When the average American is getting crushed by the economy and there are two consecutive quarters negative economic growth meeting the textbook definition, yet you still deny the reality...you’re a hack. And to the point of your question, most commonly a political hack.
Yes, most economists are hard left politicos. Currently, of the economists in the Federal Reserve System the political composition is 208 Democrats to 20 Republicans. That’s not a mistake. The margin of Democrat to Republican economists is greater than 10 to 1. What’s more, for those considered the elite economists – who are members of the Federal Reserve Board of Governors, the margin is even more jaded. Of the 100 economists with the most influence, 97 are Democrats, with one Independent and one Republican. No kidding. What’s behind this, is that most of these elite economists aren’t people who’ve had great accomplishments in the real world and truly understand economics. They’re people who’ve gone from elite colleges and academia and into the policy/influencing business. Not coincidently, prior to the implementation of the Trump tax cuts which led to a level of growth in the US economy that literally all but one leading economist said was possible, north of 3%, along with record prosperity, record wage gains relative to inflation, and record low unemployment rate for every minority group preceding the pandemic...only one economist endorsed the policy as a positive for the economy. You likely recall the overwhelmingly negative economic analysis of it which was repeatedly reported, including the analysis that the rich would benefit from the policy at the expense of the middle-class. All of which proved to be completely false. Right down to the wealthiest taxpayers actually paying more once tax deduction loopholes were removed and a record number and percentage of Americans paying no effective federal income tax.
Of course, more recently, there were the economic projections of our current situation. These horrible political hacks are the same ones who told us inflation was only “transitory” all of last year only financially admitting defeat on the narrative in December. But even that debacle didn’t deter them. Entering this year, against the backdrop of 40-year high inflation, these wiz-bang awesome economist types still said there wasn’t a chance of a recession this year. Ditto after the first quarter which provided negative economic growth which surprised them. And that takes us to where we are today. Almost all economists are consistently one thing. Wrong. Almost all economists are consistently one thing. Democrats. And all the recession avoidance today is last year’s “transitory” inflation. And yes, they know that a recession is bad for their political party of choice.
Of course, as a loyal listener you know that I was accurate in depicting what the Trump tax cuts would do. In warning about rising energy prices based on Joe Biden’s week one executive actions against US energy production and distribution. In sounding the inflation warning bell after the signing of the American Rescue Plan Act in March of last year. In sounding the recession warning bell in January of this year, etc. As usual, I’ve not made a career out of being wrong, unlike almost all economists.
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