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January 27, 2023

Is America at its worst economic point since the Great Depression?

By Andrea Widburg

Biden and the Democrats have been boasting about the economic wonders he and his administration have performed with their modernizing, equitable, diverse, green energy economic policies. However, E.J. Antoni, a research fellow at The Heritage Foundation’s Center for Data Analysis, says that the devil is in the details—and the details behind the latest GDP report show that ordinary Americans are in the worst economic condition they’ve been since the Great Depression.

RNC Research (a very good Twitter feed, despite the RNC’s dismal performance in other areas) assembled a few clips showing Biden’s economic boasts:

In Bidenland, economically speaking, everything is hunky-dory. And maybe that’s true because Biden’s family has become fabulously wealthy, as have all the people surrounding him. It’s a very rosy view from up there, in the Oval Office.

It’s less rosy where real people live. Writing at Fox Business, Antoni says that the Fed’s most recent GDP (“gross domestic product”) report contains within it terrible news about America’s flailing economy.

What Democrats like is that the report shows that the economy is still growing, albeit slowly: “The latest numbers from the Bureau of Economic Analysis show that the U.S. economy grew by 2.9 percent in the fourth quarter of last year, and 2.1 percent for 2022.” However, despite some growth, says Antoni, “economic growth is slowing down.”

Image: Men in 1931 queued outside a soup kitchen Al Capone opened. Public domain.

Business investment looks as if it grew 1.4 percent in the last quarter of 2022, but the growth was entirely for inventory, not for business expansion. “Nonresidential investment, a key driver of future economic growth, was up just 0.7 percent.”

Even that inventory growth, Antoni claims, is a problem because it doesn’t reflect businesses increasing their inventory to meet customer demand. Instead, “[i]t is the result of businesses being unable to sell off existing inventories at current prices.” Ultimately, they’ll sell them at discounts (good for strapped consumers) but useless when it comes to helping businesses grow.

The fact that net exports (exports minus imports) look good in the GDP report is also a chimera. It’s not that American manufacturers are exporting goods to a world calling out for them. It’s that we’re not importing much anymore because consumers don’t have money to buy imported goods. (I don’t know if China’s COVID surge has also meant fewer goods to import.)

There are other huge holes in the economy. Residential investment fell 26.7 percent, reflecting rising home prices and interest rates, which are paired with falling real incomes. (That is, even if people look like they’re getting raises, they’re not keeping up with inflation.)

All of this leads to what lies at the heart of Antoni’s report and spells real problems for the American economy:

But perhaps most troubling is the precipitous drop in real disposable income, which fell over $1 trillion in 2022.

For context, this is the second-largest percentage drop in real disposable income ever, behind only 1932, the worst year of the Great Depression. To keep up with inflation, consumers are depleting their savings and burning through the "stimulus" checks they received during 2020 and 2021. Credit card debt continues growing, while savings plummeted $1.6 trillion last year, falling below 2009 levels.

Put simply, to survive, Americans are spending down every penny they have and then taking on new debt. Not only is this impoverishing Americans, but when consumers run out of money, so do the businesses that supply the goods and services Americans no longer buy. And when the businesses go, so do the jobs. It’s a vicious downward spiral.

Currently, people who don’t live and die by the New York Times and the Washington Post know exactly what’s happening to them, which is that, on average, they’ve lost $6,000 in annual purchasing power since Biden put his green energy economic policies in place. Their borrowing costs have also increased by $1,400.

But we know that nothing will change until the economy harms the college-educated monied class that supports the Democrats. Those are the people who buy fine homes, fine wine, and fine vacations.

So far, the young ones in the tech world are the first to feel the pinch. No one feels too sorry for them, though. Whether at Twitter, Facebook, or Google, it seems that the ones who enjoyed the amenities but did little work are the first to go. Boo-hoo.

It’s when the economic woes hit the productive monied class that we can finally expect to see, if not some action, at least some mainstream news stories.

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