Liz Peek: Consumers Never Sank to This Level of Gloom Under Trump
Are you better off than you were two years ago?
That’s what Republicans will ask voters a year from now.
That was the question Ronald Reagan famously posed to Americans during his last debate with then-president Jimmy Carter. The country answered by delivering one of the greatest election landslides of all time; Reagan won 489 Electoral College votes to Carter’s 49.
How will the nation respond this time around?
One clue comes from the horrendous consumer sentiment survey just released from the University of Michigan. The monthly pulse-taking came in at 66.8, the lowest in a decade, revealing a deeply unhappy country.
By comparison, consumer sentiment just before Reagan’s 1980 win was 75.
It is notable that even with all partisan acrimony and in spite of COVID-19 causing death and economic hardship around the entire globe, consumers never sank to this level of gloom during President Trump’s four years in office.
Richard Curtin, who oversees the survey, says the poor results mainly reflect concern about rising prices. Consumers expect inflation next year to reach 4.9%, the highest since 2008 and well below the actual current pace of price increases.
The most pessimistic respondents were older people and lower-income Americans for whom the rising costs of basic necessities is especially harmful.
These are worrisome trends that echo other recent sentiment surveys. They are especially shocking when you consider that the stock market, normally a yardstick of the country’s mood, keeps hitting all-time highs; also, jobs are plentiful.
It only makes sense when combined with President Biden’s ghastly approval ratings, and Curtin’s assessment that consumers increasingly believe “that no effective policies have yet been developed to reduce the damage from surging inflation.”
Consumers aren’t stupid; not only does the Biden administration have no “effective policies” to manage inflation, until just recently they didn’t even admit the problem existed.
President Biden finally addressed the issue last week, sounding more like Jackie Mason playing the Borscht Belt than an effective commander in chief. “Did you ever think you’d be paying this much for a gallon of gas? In some parts of California, they’re paying $4.50 a gallon!” Surprising he didn’t add, “Did you hear the one about the price of used cars???”
Unfortunately, Biden’s late-breaking awareness of our inflation problem did not come packaged with a solution. Instead, tin-eared Biden continues to hype his multitrillion-dollar Build Back Better bill, which he says will help bring prices down.
No, it won’t. And in fact, Biden expressly said so in his muddled remarks. As he expressed shock about the price of gasoline, Biden claimed, “That’s why it’s so important we do everything in our power to stabilize the supply chain…”
Just for the record, the very real supply chain bottlenecks that are keeping goods from landing in stores have absolutely zip to do with rising gasoline prices. That’s on Joe Biden, who has discouraged U.S. oil and gas investment and also insulted and alienated the most influential person in OPEC, Mohammed bin Salman. OPEC is understandably unmoved by Biden’s pleas for more oil.
Biden also claimed, “At the same time, we’re also experiencing higher demand for goods because wages are up as well as people have money in the bank. And because of the strength of our economic recovery, American families have been able to buy more products.”
In other words, consumers are flush, and our recovery is strong. So … what on earth are we doing spending trillions more on Biden’s favored bill? The same could have been argued (and we did) before the $1.9 trillion American Rescue Plan passed in March. We did not need to hype government spending then, and we do not need to do so now.
Democrats would argue that Build Back Better (BBB) is not about infusing the economy with more cash, but instead will tackle long-term problems like expensive child care that is keeping women out of the workforce.
Their solution is to subsidize child care for low-earning Americans, while also boosting wages for people working in that field.
But if you’re a middle-class family that must foot the bills on your own, you’re in trouble. Matt Bruenig, left-leaning president of the People’s Policy Project think tank, says the proposal will jack up child care costs by about $13,000 a year, to almost $29,000. Why? Because BBB demands infant care workers be paid the same as elementary school teachers, increasing wages by 138%.
BBB also purports to make home care for the elderly more affordable, but it is union organizers who are especially excited about the proposal. Mary Kay Henry, International SEIU head, cheers, “We have a chance to turn home care, the fastest-growing job in America, from poverty-wage employment into a good union job.” Will that drive costs down? Of course not.
Why should this surprise anyone? Any industry that has a heavy government footprint, including education and health care, has seen costs soar way beyond overall inflation over time. Today, over 40% of higher education costs are funded by state and federal coffers; is it any wonder that the cost of attending a four-year college has increased at twice the level of inflation since 1985?
Or take health care, where the federal government accounts for over 40% of spending, and where total spending has increased 50-fold since 1970.
Federal programs are by definition inefficient; that’s the nature of the beast. Add to that Joe Biden’s push to ensure that workers added to provide home care, pre-K and other services be unionized, thus demanding higher pay, and you can rest assured the BBB will not lower inflation. Just the opposite.
Voters rejected Big Government this past Election Day. They should do so again in 2022. I’m guessing they will.
Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. Follow her on Twitter @lizpeek.