Bidenomics

[Kraken]

Biden has decided to double down on the economy, which is an interesting gambit since his approval on that issue is in the 30s.

Bidenomics is simply defined as repudiating supply-side, trickle-down economics that has failed us since the 1980s in favor of the New Deal philosophy of building the economy "from the ground up and from the middle out," investing in consumers and the middle class. You'd think that would be wildly popular, but....

Although consumers are deeply skeptical, that plan is working. The labor market is historically strong, wages are growing solidly, and the recession keeps getting postponed.

This is meant to be a general discussion of the economy heading into the next election, but I'll start it out with this tidbit:

This fellow, whose recent predictions have been solid, believes that us Baby Boomers will provide the tailwind to keep lifting the economy.

“The common explanation for the no-show recession despite the 500bps hike in the federal funds rate is that consumers were still spending their excess savings from the pandemic. But once this cash is spent over the rest of this year, the thinking goes, a consumer-led recession is likely in 2024,” he wrote in a Wednesday note to clients. “I disagree.”

Yardeni, an economist by training who previously served as chief investment strategist at both Prudential Financial and Deutsche Bank, now points to another positive sign for the economy—one that could keep consumer spending, which makes up 70% of U.S. GDP, elevated for years to come despite stubborn inflation.

“Consumers’ excess savings of roughly $0.5 trillion currently is dwarfed by the net worth held by the Baby Boom generation that is retiring,” he explained. “They have just started to spend it. Their progeny undoubtedly expects to inherit some of that wealth and therefore can save less.”

This resonates with me as a boomer nearing retirement who has a lifetime of savings and investment socked away. It's time to start spending it down. And there are a whole lot of people like me (financially speaking) who have more assets than years remaining.

[Isgrimnur]

As boomer progeny, I expect to inherit nothing. Anything I do inherit is gravy. And neither my sister nor I re prone to acting entitled.

[Blackhawk]

I'm the progeny of the Silent Generation, and I'm about 20 years late for any inheritance.

[Kraken]

My Silent Generation birth mother just emailed me to get my SS# so she could update her beneficiary. Who is me. She isn't wealthy but I'm going to get whatever she's got, because she has nobody else to leave it to. I told her that I don't need it and she doesn't owe me anything so she should bequeath a charity of her choice instead. She's conservative so any bequest would be a bad one, Taking her money is a public service.

Me, I'd rather spend my money while I'm alive than leave it to my nephews and niece. I expect that they'll get some substantial crumbs, but Imma eat as much of my cake as I can before the party ends.

Boomers have money and we're going to let the bon temps rollez, is the point. Trillions of taxable dollars are coming out of hibernation. Those dollars aren't subject to payroll taxes, though, so it sucks to be Social Security.

[malchior]

Biden has decided to double down on the economy, which is an interesting gambit since his approval on that issue is in the 30s.

Bidenomics is simply defined as repudiating supply-side, trickle-down economics that has failed us since the 1980s in favor of the New Deal philosophy of building the economy "from the ground up and from the middle out," investing in consumers and the middle class. You'd think that would be wildly popular, but....

There are some real headwinds to the sort of progress he is claiming that he is stepping over. Fed policy, federal tax policy, and fiscal support aren't really aimed at the middle class. There has been very little reform of the factors that have been siphoning wealth from the bottom of the wealth curve to the top for 40+ years now. The recently Trump tax changes actually accelerate it. To be fair to Biden this isn't a Biden problem to solve and it needs to be fixed in Congress. But declaring a turn from Reaganomics puts him hip deep in some Grade-A bullshit too.

Frankly IMO he is trying to take credit wherever he can but this 'Bidenomics' stuff isn't on solid ground...yet. It does look like there is a path in that direction in small measure with investing in on-shoring silicon based manufacturing, batteries, and green tech. That fiscal support is mostly filtering through large corporations (for instance helping Intel build factories) which might broaden the middle class over time. But that's still some distance away and is a bet. This is him selling a vision more than a reality right now which is probably decent politics if people buy into it.

“The common explanation for the no-show recession despite the 500bps hike in the federal funds rate is that consumers were still spending their excess savings from the pandemic. But once this cash is spent over the rest of this year, the thinking goes, a consumer-led recession is likely in 2024,” he wrote in a Wednesday note to clients. “I disagree.”

This isn't the common explanation. It is one of the explanations. There are others and they are all probably complimentary. A lot of things happened. The supply chain normalized unlocking economic potential. There is also still a relatively increased amount of federal fiscal support working through the system from ARP, IRA, and the Chips Act. Additionally, there has been historically high investment inflows from foreign sources with global companies investing in the United States instead of laggard European economies such as the UK where growth potential is looking weak at the moment.

Yardeni, an economist by training who previously served as chief investment strategist at both Prudential Financial and Deutsche Bank, now points to another positive sign for the economy—one that could keep consumer spending, which makes up 70% of U.S. GDP, elevated for years to come despite stubborn inflation.

“Consumers’ excess savings of roughly $0.5 trillion currently is dwarfed by the net worth held by the Baby Boom generation that is retiring,” he explained. “They have just started to spend it. Their progeny undoubtedly expects to inherit some of that wealth and therefore can save less.”

This is pretty speculative. Maybe this will happen but I have significant doubts. There is a fairly significant issue out there - wealth inequality. Boomers as a generation have much of the wealth but it is very unequally distributed. Lots of folks will tout the average net worth of a boomer household at $1.4M but the median is actually somewhere nearer to $500K. Much of that being the value of a home. Worse, the median value of their 401(k)s is something like $200K. If they follow the 4% rule, this amounts to a whopping $8K per year. Not very stimulative! So unless there are a spate of reverse mortgages or renting out their homes there isn't necessarily income flows to "spend down" into the economy.

Social security helps here somewhat but that is a balanced factor considering it is being paid by current workers. Still dollars spent by boomers have velocity as they turnover and these dollars are likely to be spent since a retired boomer may very well need every last dollar in that check.

Edit: Extra credit. Just some back of the envelope stuff but the median boomer household will again have approximately ~$700 per month from a 401k and ~$3400/mo from SSI (assuming the median boomer household is a married couple). That's ~$4100/mo. and I'd round that up to $50K/yr. The rosy predictions probably aren't supported by that spend. They'd actually potentially be a drag as it's well below median household income. The median boomer will be well above the poverty line for sure but it's hardly raining dollars from the sky type money though. I'd temper expectations a bit.

Also we should consider all the outlays the young have to spend on supporting their healthcare as well. There will likely be healthcare cost inflation from all the demand which will have an impact on non-boomer household balances. I could probably find a few more areas to convolute this but IMO those predictions build in a faulty assumption that the dragon's horde of the 1% boomer gets spent down which is not likely. A lot of boomer wealth may very well end up tied to dynastic wealth transfers which may have the effect of perpetuating the political unrest in our system.

This resonates with me as a boomer nearing retirement who has a lifetime of savings and investment socked away. It's time to start spending it down. And there are a whole lot of people like me (financially speaking) who have more assets than years remaining.

A boomer thinking the boomers are going to save the world. That's new!

[Madmarcus]

That's ~$4100/mo. and I'd round that up to $50K/yr. The rosy predictions probably aren't supported by that spend. They'd actually potentially be a drag as it's well below median household income. The median boomer will be well above the poverty line for sure but it's hardly raining dollars from the sky type money though. I'd temper expectations a bit.

As a fairly early Gen X I'm not sure I'm as pessimistic. My kids are out of the house, the house is paid off, my healthcare isn't cheap but will be cheap in a few years due to retirement benefits and then Medicare. Throw in no need to put part of the income into retirement accounts and the reduced taxes due to capital gains vs. income and various tax advantaged accounts and that $50k looks different from a $50k yearly family income for a younger family.

[malchior]

That's ~$4100/mo. and I'd round that up to $50K/yr. The rosy predictions probably aren't supported by that spend. They'd actually potentially be a drag as it's well below median household income. The median boomer will be well above the poverty line for sure but it's hardly raining dollars from the sky type money though. I'd temper expectations a bit.

As a fairly early Gen X I'm not sure I'm as pessimistic. My kids are out of the house, the house is paid off, my healthcare isn't cheap but will be cheap in a few years due to retirement benefits and then Medicare. Throw in no need to put part of the income into retirement accounts and the reduced taxes due to capital gains vs. income and various tax advantaged accounts and that $50k looks different from a $50k yearly family income for a younger family.

You are talking about the household impact but the analysis means to talk about the reality of the *economic impact*. They are very different things. That $50K might spend fine but it is not going to be stimulative in the general economy. In fact, I'm arguing in practice it'll be a drag because instead of spending this pent up wealth, the median boomer household will likely be spending less than they were before retirement.

Edit: Again with the back of envelope here but the math is relatively simple. If the median income drops from the current median of ~100K for a 65-year old couple to ~50K that is ~50K less spend/investment in the economy. Some of that reduced income will be spread throughout the economy in higher wages/job replacements. However, we've seen the participation rate fail to return to pre-COVID levels so this is an area we will need to wait and see how it develops. There will be a balance between how much profit businesses can keep and how much productivity they can squeeze out of the non-retiring labor force.

Another possibility is we may see the economy stagnate or slow down and shrink the pie to compensate. The idea it accelerates? It doesn't really make sense to me without the top boomers suddenly increasing spend/investment activity beyond their current baseline. That might happen but I don't see it being more significant than the many more boomers on the other side of the wealth curve.

On top, as you note they aren't going to be earning money to put into retirement accounts which means companies have less money to invest in growth. Boomers or early GenX switching to "cheap for them" healthcare effectively may lead to increases in the FICA share of tax on the young to support their healthcare. The same idea for SSI. It's not a demographic time bomb like people used to talk about but I find this notion that the boomers are saving us from recession to be built on pretty flimsy ground. If you just even take a cursory look under the hood it starts to fall apart.

[Isgrimnur]

The same idea for SSI. It's not a demographic time bomb like people used to talk about but I find this notion that the boomers are saving us from recession to be built on pretty flimsy ground.

It sounds like something a boomer would say.

[Montag]

How many private and state pension funds can handle the load?

[Pyperkub]

How many private and state pension funds can handle the load?

The ones which weren't deliberately underfunded and/sabotaged?

Sent from my SM-S908U1 using Tapatalk

[malchior]

How many private and state pension funds can handle the load?

Don't remind me - I didn't even go there. The majority of Boomers are in 401(k)s but a not insignificant percentage are in state systems like NJ where they are underfunded pretty badly. I didn't go exhaustive with my temperature check but this is another piece of the puzzle which makes me question the notion that the boomers are going to save us (instead of continuing their pattern of utterly fucking us).

[Victoria Raverna]

[Kraken]

Well played!

[El Guapo]

She's so stupid and such a product of the conservative media bubble that she genuinely thinks that what she is saying is devastating to Biden.

[LordMortis]

Man, he needs to keep that all through the election cycle. Put it on TV and social media political ads. That is a thing of beauty. It's literally why I voted for him. It's nice to have a reminder when I don't feel so great about his presidency.

[Unagi]

She's so stupid and such a product of the conservative media bubble that she genuinely thinks that what she is saying is devastating to Biden.

Wait, that was un-cut, and actually what she said - for real?

[Victoria Raverna]

She's so stupid and such a product of the conservative media bubble that she genuinely thinks that what she is saying is devastating to Biden.

Wait, that was un-cut, and actually what she said - for real?

Not uncut, but not in a way to make she seemed to say what she didn't:

[Kraken]

She's so stupid and such a product of the conservative media bubble that she genuinely thinks that what she is saying is devastating to Biden.

Wait, that was un-cut, and actually what she said - for real?

This is why Republicans mustn’t speak truth.

[Kraken]

The US economy reaches superstar status. No, really, says the Atlantic.

If the United States’ economy were an athlete, right now it would be peak LeBron James. If it were a pop star, it would be peak Taylor Swift. Four years ago, the pandemic temporarily brought much of the world economy to a halt. Since then, America’s economic performance has left other countries in the dust and even broken some of its own records. The growth rate is high, the unemployment rate is at historic lows, household wealth is surging, and wages are rising faster than costs, especially for the working class. There are many ways to define a good economy. America is in tremendous shape according to just about any of them.

...

From the end of 2019 to the end of 2023, U.S. GDP grew by 8.2 percent—nearly twice as fast as Canada’s, three times as fast as the European Union’s, and more than eight times as fast as the United Kingdom’s.

“It’s hard to think of a time when the U.S. economy has diverged so fundamentally from its peers,” Mark Zandi, the chief economist at Moody’s Analytics, told me. Over the past year, some of the world’s biggest economies, including those of Japan and Germany, have fallen into recession, complete with mass layoffs and angry street protests. In the U.S., however, the post-pandemic recession never arrived. The economy just keeps growing.

...

From the beginning of the pandemic through the fall of 2023, the last period for which we have good comparative data, real wages in both Europe and Japan fell. In Germany, workers lost 7 percent of their purchasing power; in Italy, 9 percent. By these metrics, the only workers in the entire developed world who are meaningfully better off than they were four years ago are American ones. ... Averages can conceal a lot, of course. The rise in inflation-adjusted wages, which economists call “real wages,” might not be such good news if it were flowing mostly to the already-wealthy, as it did during the recovery from the Great Recession. In fact, from 1964 through 2018, real wages for most workers hardly budged; almost all gains went to the richest Americans. In the early days of the pandemic, when millions of low-income workers found themselves suddenly out of a job, it would have been reasonable to expect the same trend to play itself out.

Instead, the opposite happened. A recent analysis from the Economic Policy Institute found that from the end of 2019 to the end of 2023, the lowest-paid decile of workers saw their wages rise four times faster than middle-class workers and more than 10 times faster than the richest decile. A recent working paper by Dube and two co-authors reached similar conclusions. Wage gains at the bottom, they found, have been so steep that they have erased a full third of the rise in wage inequality between the poorest and richest workers over the previous 40 years. This finding holds even when you account for the fact that lower-income Americans tend to spend a higher proportion of their income on the items that have experienced the largest price increases in recent years, such as food and gas. “We haven’t seen a reduction in wage inequality like this since the 1940s,” Dube told me.

...

So far we’ve been talking about wages: the money people are paid by their employer. To better capture overall financial well-being, we might instead look at household wealth, which takes into account the full range of people’s debts and assets. Over the past few years, Americans have experienced the biggest surge in wealth in at least three decades.

The big asterisk about that statistic is that most of that wealth increase has come from rising house values. Those without houses aren't sharing in it, and in fact are locked out.

Housing is one of several crucial categories, along with childcare, health care, and higher education, that have ballooned in cost in recent decades, putting a middle-class lifestyle further and further out of reach—what my colleague Annie Lowrey has called the “Great Affordability Crisis.” The past few years of high interest rates, which make borrowing money more expensive, have jacked up costs even more. And despite the recent good news, the U.S. still has lower life expectancy and much higher levels of inequality, poverty, and homelessness than other wealthy nations. For millions of people, getting by in America was a struggle before the pandemic and continues to be a struggle today.

Still, that doesn’t change the fact that the U.S. economy has had a remarkable four-year run, judged against both its own history or the international competition. A few years of good news isn’t enough to make up for 40 years of rising inequality and stagnant wages. But it’s a whole lot better than the alternative.

IDK how to square all of this with Biden's dismal 30% approval rating on the economy, or with voters' willingness to believe that the trump economy was the best in world history. But the numbers say that not only is Bidenomics working...it's hitting it out of the park despite the Fed's determination to tamp down growth.

[Daehawk]

hahaha I can hardly believe that stupid bitch put her foot in her mouth and said all that and didn't understand what she was saying, Lordy.

I like what Im hearing here from all this thread now. Lets just hope the GOP MAGA Republicans and their supporters dont win the White House and sink all our gains and country into the ocean.

[Kraken]

16 Nobel economists warn that trump will make inflation worse

Inflation remains public enemy No. 1 in today’s economy. Americans are fed up with the cost of living and former President Donald Trump says he will help.

Yet 16 Nobel Prize-winning economists are warning that Trump’s proposals wouldn’t just fail to fix inflation — they would make matters worse.

“We the undersigned are deeply concerned about the risks of a second Trump administration for the US economy,” the economists wrote in the Tuesday letter, which was first reported by Axios.

The letter, organized by famed economist Joseph Stiglitz, argued there are valid reasons to worry the Trump agenda will “reignite” inflation.

In particular, the economists point to Trump’s “fiscally irresponsible budgets” and nonpartisan research from the likes of the Peterson Institute, Oxford Economics and Allianz that finds the Trump agenda — if successfully enacted — would increase inflation.

...

By contrast, the economists praised Biden’s work on the economy, arguing his major investments in infrastructure, manufacturing and climate will lower long-term inflationary pressure and ease the clean energy transition.

“While each of us has different views on the particulars of various economic policies,” the economists wrote in the letter, “we all agree that Joe Biden’s economic agenda is vastly superior to Donald Trump’s.”

...

Last week, Moody’s Analytics cautioned that if Republicans sweep into power in November, a toxic mix of higher tariffs, fewer immigrants and tax cut-fueled stimulus would cause inflation to reaccelerate, unemployment to climb above 5% and the US economy to stumble into a recession.

By contrast, Moody’s found that if Biden wins and there is a divided Congress, the Fed will start cutting interest rates, inflation will go back to normal and the US economy will avoid a recession.

But what do a bunch of egghead Nobel Prize winners know? There's only 16 of them. Do your own research!

[hepcat]

Fox News is trumpeting that most of those economists are supporters of Biden. Of course they are, you dolts. They just told you that Trump will hurt the economy, for Christ’s sake. Why would they then support Trump? Fucking idiots.

[LordMortis]

Well, yeah inflation might come but it won't happen until close 2028, that's a future me problem and a future president problem. And even then, we can always just declare bankruptcy and start again and make it all someone else problem. Art of the Deal. It's being smart.

[Pyperkub]

Well, yeah inflation might come but it won't happen until close 2028, that's a future me problem and a future president problem. And even then, we can always just declare bankruptcy and start again and make it all someone else problem. Art of the Deal. It's being smart.

Another tariff war would ignite inflation a lot faster, as would mass deportations.

[LordMortis]

Well, yeah inflation might come but it won't happen until close 2028, that's a future me problem and a future president problem. And even then, we can always just declare bankruptcy and start again and make it all someone else problem. Art of the Deal. It's being smart.

Another tariff war would ignite inflation a lot faster, as would mass deportations.

That would be counteracted by opening trade with Russia and bringing Ukraine under heel to open up breadbasket/fertilizer as well as OPEC+ trade, reducing our reliance on domestic labor for food and energy allowing us to better protect the border against our need for labor.

[Grifman]

Most people just don’t understand how well Biden handled the economy coming out of Covid:

[Zarathud]

Economists do, if they do business not politics.

[$iljanus]

Most people just don’t understand how well Biden handled the economy coming out of Covid:

Deep state propaganda!

But probably people don't care if the price of their bread is cheaper than bread in the UK. It's still more than what they paid before Covid. I think this is an important point though and hopefully enough people would also appreciate this sort of data.

[LordMortis]

Economists do, if they do business not politics.

Or are paid by our would be oligarchs.

[Kraken]

Either Harris or trump is about to inherit an economy that's firing on all cylinders. Inflation is whipped, employment is strong, wages are rising, consumers are spending, interest rates are falling, corporate profits are healthy, GDP is growing at a comfortable clip, and the stock markets are perking merrily away (although in a holding pattern while the election plays out). You have to look hard to find a metric that isn't positive.

Harris will continue and extend the policies that brought us here, while trump -- well, economists have thrown red flags all over trump's tariffs and deportations. He will quickly overturn the progress of the past four years.

[LordMortis]

Help my Izzy wan kenobi. You're my only hope.

I heard on the TV this morning along the lines of while the majority of Americans believe the economy is poor, they are spending in they way spend for a good economy They gave no reference to back this claim. How would you show that?

[Carpet_pissr]

I think it was Carter that said Presidents don’t handle The Economy. They get/take credit/blame all the time for it being good or bad though.

It’s really much much bigger than any one president.

[Scraper]

I think it was Carter that said Presidents don’t handle The Economy. They get/take credit/blame all the time for it being good or bad though.

It’s really much much bigger than any one president.

The exception being that if Trump actually did what he says he will do with tariffs then he will have a massive negative affect on the economy for which he will be solely to blame.

[Unagi]

I think it was Carter that said Presidents don’t handle The Economy. They get/take credit/blame all the time for it being good or bad though.

It’s really much much bigger than any one president.

Not to mention that if the President could control the economy - we would probably call that government socialism.

Point that out to every MAGA that complains about the price of eggs.

[LordMortis]

Also heard on the TV this morning from GOP pundits, when the red wave happens be prepared for 2-3 years of bad economy and hardships while they make things more efficient and fair. (Read: funnel most federal spend to private equity while dismantling federal services and cutting taxes for the wealthiest while imposing a national sales tax in the form of universal tariffs)

[Unagi]

At first, when you jump in this pot of water, it's going to feel really hot.

[Carpet_pissr]

Also heard on the TV this morning from GOP pundits, when the red wave happens be prepared for 2-3 years of bad economy and hardships while they make things more efficient and fair. (Read: funnel most federal spend to private equity while dismantling federal services and cutting taxes for the wealthiest while imposing a national sales tax in the form of universal tariffs)

That may be the most horrifying sign I have seen lately. If they are front-loading expectations that the shit is going to hit the fan BECAUSE they get in power...that is a massive shift in strategy, and makes me think they actually will take things next level should they win. Jesus, what a timeline. My Portugal out is probably dead at this point, so I need to find another Trump refugee state/country that will take me (and that I can afford to live in). Coming from SC that will not be easy.

[LordMortis]

It's not the first float I've heard the political right. Just a couple of weeks ago, I was listening to the only way to save the federal government is through inflation and the best inflation to have is through punitive tariffs.

So first they want to federally tax your idle savings and as a means to do so they want to a high federal sales tax on non domestic goods. I wonder how they oligarchs intend to hedge all this or if they plan is to take a hit knowing a much bigger hit grows as you move down the scale of being wealthy.

[Kraken]

I don’t want to start a trump economy thread for obvious reasons. But I have to put this out there: If trump should win, what are you doing with your investments? Will the markets crash based on his proposed economic policies, or will they wait and see? Might they even surge because the rich are going to get much richer?

My gut reaction says to pull money out of stock funds and park it in cash. My ESG fund in particular (which has done very well with Bidenomics) will suffer under Republican rule. But that falls under “timing the market,” a notorious fool’s errand.

I suppose it depends on Congress’s composition. I’m just nervous about the possibility of a Black Wednesday next week.

[Isgrimnur]

I'd look for promising foreign ETFs. But I've got 19 more years to SSA.