Trump Versus Biden: The Substantial Fall in Real Wages for Most Workers Under Biden

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Yves here. We are excerpting the opening section of a very important paper by Thomas Ferguson and Servaas Storm. The paper proper explains, in gory detail, how the regular whinging in Democrat-friendly media outlets, about how workers have gotten real wage gains under Biden and are proving their illiteracy via ingratitude, is false. Most workers are markedly worse off in real wage terms. Increases in consumption come substantially and potentially entirely from unprecedented wealth gains at the top of the income spectrum, which has lead them to spend freely despite falls in their real incomes too. Note further these conclusions rely on CPI as the measure of inflation, which many commentators and reader complain understates actual inflation.

The authors finally point out that the top-heavy and wealth-effect driven spending means that Fed interest rate increases would have to rise to a level that would likely kill the economy stone cold dead to beat inflation. We predicted this early on.

So if Trump wins, you will know why. The Democrats relied on their own flattering and superficial metrics to convince themselves that ordinary Americans were doing better under Biden. In fact most became worse off, as many correctly perceive. And they kept flogging the “voters are stoopid” message, adding insult to injury.

Please circulate this paper widely. We are reposting the opening section below, which contains the gist of the argument, and embedding the full document at the end.

By Thomas Ferguson, Research Director at the Institute for New Economic Thinking, Professor Emeritus, University of Massachusetts, Boston; and Servaas Storm, Senior Lecturer of Economics, Delft University of Technology. Originally published at the Institute for New Economic Thinking website


The wafer-thin poll margins separating President Joe Biden and Donald Trump have surprised and
baffled many analysts. This paper attempts no analysis of the election itself. It focuses instead on a clinical assessment of its macroeconomic context. Building on previous work, this paper looks first at inflation’s overall effect on real wages and salaries. It then considers claims advanced by Autor, Dube and McGrew (2023) and others about wages of the lowest paid workers. Real wages for most American workers have declined substantially under inflation. We observe no sign of a radical transformation of the U.S. labor market in favor of the lowest-paid workers. The (modest) increase in real hourly wages of the bottom 10% of U.S. workers during 2021-2023 owed little to any policy change or declining monopsony power: It was a unique case of wages rising to subsistence levels as COVID exponentially multiplied risks of working at what had previously been relatively safe jobs at the bottom of the wage distribution. The paper then analyzes inflation’s persistence in the face of substantial increases in interest rates.

We document the wealth gains made by the richest 10% of U.S. households during 2020-2023. These wealth gains, which have no peacetime precedents, enabled the richest American households to step up consumption, even when their real incomes were falling. Empirically plausible estimations of the wealth effect on the consumption of the super-rich show that the wealth effect can account for all of the increase in aggregate consumption spending above its longer-term trend during 2021Q1-2023Q4. Importantly, the lopsided inequality in wealth makes controlling top heavy consumption spending by raising interest rates much harder for the Federal Reserve, without interest rate increases that would bring the rest of the economy to its knees much earlier. We also show that the persistence of inflation in several key service sectors is heavily influenced by captive regulators – a condition that higher interest rates cannot remedy.


First, there was COVID. Then came surging inflation, two major shooting wars, food and climate calamities, and an intractable international debt crisis. Now as drones and missiles streak over the real plains of Armageddon almost every day, another apocalyptic event looms on the horizon – a genuine Second Coming: Despite January 6th, major business reverses, and myriads of court cases, prosecutions, and high-profile litigation, Donald Trump is locked in a tight race for the White House with President Joe Biden.

Just when he needed money the most, a stunning feat of financial engineering vaulted him back into the ranks of the American super-rich (Moore, 2024). Though some major business groups remain aloof (Goldmacher and Haberman, 2024), many billionaires who swore off ever supporting him again are flocking back to his standard, while companies that loudly proclaimed their determination to cut off campaign contributions to Republican legislators who supported the January 6th effort are pouring funds into the coffers of both the legislators and Trump’s campaign (Gold, 2024).1 With a vast network of lavishly funded think tanks drawing up blueprints for drastically revamping government in the event Trump wins, Democratic leaders are plainly distressed (Arnsdorf, et. al., 2023). Already mired in a blazing civil war over policy toward the Middle East, they are now weighing their responses to the United Autoworkers (UAW) electrifying success in organizing the Volkswagen plant in Chattanooga, Tennessee and the wave of unionization efforts its success is engendering as inflation stays stubbornly high.

The wafer-thin poll margin baffles establishment news and political analysts (Wallace Wells 2024; Krugman, 2024a). Wringing their hands in exasperation, they point to macroeconomic indicators indicating that the U.S. economy is humming along. Powering out of the COVID19 recession of 2020, the economy is growing at more than 3% (on an annual basis) in the first quarter of 2024. The official unemployment rate of 3.8% in March 2024 hovers near a fifty-year low; real earnings of U.S. workers have been rising for some months; and consumer price inflation has dropped from 8.6% in the second quarter of 2022 to 3.2% in the first quarter of 2024. The economy’s ability to defy widespread predictions of recession in the face of Federal Reserve monetary tightening had even fed hopes for a “soft landing” that could open the way for another round of interest rate cuts that could spur financial markets to new records – at least before the Chattanooga vote.

Many observers also extol the President’s landmark policy achievements: Not simply the vast aid programs for ordinary Americans that his administration launched as it came to power, but the series of dramatic industrial policy initiatives that startled the rest of the world. These include the Inflation Reduction Act (IRA), which set in motion far-reaching transformative programs of loans, grants, and tax credits to adapt the US to the realities of climate change; the Chips Act, which incentivizes industries to reshore production in strategically important industries; and a separate infrastructure package worth more than a trillion dollars over time. Not to mention the other steps the administration took on behalf of racial justice, student debt relief, unions, and consumer protection.

The perplexity runs so deep that a cottage industry has sprung up generating ingenious explanations of why the election is so close. Their common core is the invocation of clear forms of irrationality – individual and social cognitive failures, mass amnesia about Trump’s actual record, or, inevitably, disinformation spread by any number of bad actors at home or abroad (Glasser, 2024; Krugman, 2024b).2

We view this situation as a trap, especially in the light of the UAW’s stirring victory and mushrooming campus protests. A year ago, as the Fed responded to inflation by abandoning its policy of quantitative easing – ultra low interest rates – and started rapidly raising them, we argued that the economic situation of most Americans was far more tenuous than commonly recognized (Ferguson and Storm 2023a). We contended that relying on central banks and fiscal policy tightening to contain the historically specific form of inflation raging through the economy would not work out well.

It was simply untrue, as Lawrence Summers and many other mainstream economists contended, that the inflation resulted from a US-specific wage/price spiral, set in motion by the President’s stimulus program. The time paths of inflation and the stimulus spending did not at all align; and, decisively, wages clearly lagged well behind prices. Since our paper, evidence against this view has continued piling up and we are not surprised that at a recent Brooking conference no one at all defended the position.

In fact, the inflation was worldwide and shocks to supplies were clearly its primary cause, though of course profit-maximizing firms took advantage of the fear and uncertainty to raise profit margins when they could (“profit inflation”).3

The most immediately disruptive of these supply shocks came from COVID – full stop. But other forces compounded the desperate situation. We pointed to accelerating climate change, with its dramatic effects on storm damages, floods, droughts, temperatures, and food prices, and an increasingly belligerent multipolar world economy that was redefining risks for value chains and national security.

The customary response of central banks to inflation – raising interest rates – would do little to resolve any of the underlying problems. COVID and its supply chain snarls required active large- scale government interventions to increase supplies, reduce bottlenecks, and protect public health. In practical terms, that made inevitable a new round of massive borrowing by governments.

Neither would raising interest rates palliate supply problems. They were certain to discourage investments in climate change mitigation, given that many of the most promising forms of renewable energy require major upfront investments to scale up efficiently. Many renewables also return steady, but not flashy streams of revenue, so that higher interest rates could reduce their appeal to financial markets demanding rates of return at levels comparable to those of, for example, private equity. But slow walking efforts to counter climate change would guarantee further future rounds of price shocks and other adaptation costs as the climate worsened. Higher rates would also inhibit adjustments in value chains and production shifts required for resiliency and enhanced national security amid radically shifting international alliances and conflict threats.

We especially emphasized the potentially fatal implications for controlling spending via interest rates from the dramatic change in the wealth holdings of American’s most affluent citizens. These swelled as a consequence of the Fed’s latest round of quantitative easing after COVID hit. As the central bank’s ultra-low interest rate policy levitated financial markets, wealth concentration quite exceeded levels reached earlier. Most gains went to the rich and super-rich. As COVID eased off in 2022 after vaccines were introduced, spending by the wealthy exploded, even as ordinary Americans struggled as the temporary government programs ran out. The increase in spending out of wealth, we estimated, was roughly the size of the entire Biden stimulus program. Coming online just as total government spending nosedived, it massively increased demands by the affluent for goods in short supply. In the inflation debate, this was the missing elephant in the room.

Our paper contended that upward shifts in wealth of this magnitude – which had no peacetime precedents – were producing dramatic shifts from quantity to quality in the structure of the economy. In the short run, the lopsided inequality in wealth would make controlling consumption spending by raising interest rates much more difficult. Consumption by the affluent would be far harder to slow, without interest rate increases that would bring the rest of the economy to its knees much earlier. The shift in wealth would also fuel illusions that high volumes of aggregate spending were reliable indicators of broad social welfare.

Which they were anything but. We showed that claims of broad wage gains under Bidenomics were specious. The opposite, in fact, was the rule: The U.S. was plainly in the throes not of a wage-price spiral but a price-wage merry go round, with real wages for most workers falling steadily behind prices. For one set of workers only this pattern did not hold true: workers at the very bottom of the wage distribution were indeed seeing pay raises in real terms. This owed little to any policy change: It was a unique case of wages rising to subsistence levels as COVID exponentially multiplied risks of working at what had previously been relatively safe jobs and workers at the bottom of the wage distribution left their jobs.

The increasing economic heft of the superrich exercised a magnetic attraction on the American economic structure, transforming parts of it quickly. In many instances, the result was plainly socially irrational: jobs in high-end restaurants were flourishing, while low-paid work in nursing homes, childcare, or education dried up. Long-COVID and related health problems continued to disorganize labor markets, leading many workers to withdraw in whole or in part from them and confusing analysts who judged according to older rules of thumb.

A year later, some of the points we made, especially concerning climate change, have been taken up, if not exactly taken to heart (Ferguson and Storm, 2023b). But the central parts of our macroeconomic message mostly have not, though recently some bank analysts and media accounts
have begun to recognize the importance of the wealth effect that we pointed out already in January 2023 (Rugaber, 2024). But the issues of wealth effects and real wages, unfortunately, are crucial for understanding why an incumbent president presiding over a growing economy is scrambling to hold on. Or why, five years after COVID and four years after a Democratic President who pledged to be the most pro-union president in American history, the prospect of a real wage/price spiral (or “Kaleckian Moment”)4 might at last be a real possibility as the presidential race heads into its home stretch.

This paper is not directly a venture in election analysis. That would require attention to many issues we have no space for here, such as foreign policy, abortion, or immigration and border issues. We have a sinking feeling that the outcome of the 2024 election may now be in the lap of the gods – or, as statisticians might say, some Poisson distribution. With age an issue for both candidates, a public stumble by either could tip the outcome. So could any number of foreign policy surprises, including the course of several wars. OPEC+ is clearly trying to raise oil prices, which will certainly affect inflation. Whatever happens, Federal Reserve policy will surely be important. If the Fed responds, as so often in American history, to a belated wave of efforts by workers to catch up with inflation by tightening policy or holding rates up too long, it could indeed shorten the odds of a Second Coming.

Instead, this study is one of several papers that we are writing to illuminate the real macroeconomics of the Second Coming, which we emphasize that we do not consider inevitable. Our hope in this one is to explain how the macroeconomic problems in our earlier paper have blinded many participants and observers to the actual state of the American economy as the election approaches.

The current paper returns to the key questions of wages and incomes and how wealth effects cripple reliance on interest rates to control inflation. British studies (e.g., Alexandri et al. 2024), have drawn attention to COVID’s continuing impact and related medical issues on labor markets. In the United States, comparable discussions can be found only in specialized, public health-oriented circles. Most of the press, both political parties, the Biden administration, and the Fed, emphasize how well labor markets have rebounded. The importance of recent work identifying biomarkers associated with Long COVID or the ramifying hazards of reinfection (Alvelda, 2024; (Strulik and Grossman, 2024) has yet to be broadly recognized. We believe COVID and related public health problems continue to roil labor markets; the epidemic is not over, though its effects have become more subtle and complex. The present study treats COVID only as much as necessary to understand debates about low wages; we leave its broader effects on labor markets for a subsequent paper.

Our exposition divides, like Caesar’s Gaul, into three parts. Part I analyzes the course of wages. It begins by surveying economy-wide evidence. The conclusion is inescapable that real wages for most Americans have dropped substantially during the Biden presidency. The cumulative losses for most are substantial. We then consider in more detail claims advanced by Autor, Dube and McGrew (2023) and others about wages of the lowest paid workers. Stressing the rebound in labor markets since COVID, they argue that these workers, at least, have enjoyed substantial gains – characterized at times as “unprecedented in a generation.” They also argue that differences between the highest and lowest wage levels have compressed significantly, concluding that “disproportionate wage growth at the bottom of the distribution […] reversed almost 40% of the rise in 90-10 log wage inequality since 1980, as measured by the 90-10 ratio” (Autor et al. 2023, pp. 33-34).

These claims were not correct when they were put forward and they remain wide of the mark now. They draw mostly on evidence from hourly wage data, which have severe limitations. We will show that most gains by the lowest paid workers occurred in a few months in 2020. They largely
reflect, as we argued before, rising premia for safety when low paid, but safe, jobs suddenly became low paid and deadly once COVID hit. Most definitely these wage gains do not reflect sudden changes in monopsony – the local domination of labor markets by one or a few employers.

We buttress our conclusions by tracing how fitfully data for personal income, life expectancy and median household incomes have rebounded from their disastrous nadirs at the height of COVID. We are thus not surprised by the new wave of unionization efforts, though their success is hardly guaranteed.

Part II of our paper looks again at the evidence about wealth effects. Despite the sharp rises in interest rates, stock markets have surged again. The latest climb arguably reflects hopes for early interest rate cuts (now mostly dashed) but also the advent of epoch-making technological advancements. Whatever its causes, the surge has brought the wealth of affluent Americans back to record levels. And just as they did after Omicron waned, affluent Americans are again spending at prodigious levels. As before, interest rate checks on their consumption are feeble.

Our Conclusion shows how continuing demand, (mostly) by the affluent for services whose
production conditions are controlled by captive public regulators, helps fuel inflation in the service sector. Raising interest rates to control inflation in such cases is pointless; policy has to address the underlying problem, not squeeze the rest of the economy to no end.


1 Partial inventories of major companies that promised not to fund election deniers are widely available on the internet. See, e.g., Piper and Montallero (2023). Fundraising for 2024 is massive and reporting lags behind the reality. We have checked enough to support our paper’s claims here.

2 It is not news that partisans of each party tend to misperceive the state of the economy. The 2024 case quite clearly goes well beyond such effects. It obviously affects many Democrats, for example. The obvious insufficiency of this chestnut inspires the present flood of ruminations.

3The literature is vast, but see Storm (2023); the question cannot be reduced to simple mark-up maintenance. Note that with so much inflation coming from the supply side, profit inflation can hardly drive the entire process. In this respect, a recent paper by the San Francisco Fed (Leduc, Li, and Liu, 2024) creates something of a straw man. They do not show detailed data, but it is interesting that “salient industries” show clear evidence that markup rose over time and that over the entire economy, their lowest estimate remains in positive territory, unlike the other recoveries they plot.

4 See, e.g., Ratner and Sim (2022), but also the acute critique in Seccareccia and Romero (2022).

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  1. zagonostra

    The perplexity runs so deep that a cottage industry has sprung up generating ingenious explanations of why the election is so close. Their common core is the invocation of clear forms of irrationality – individual and social cognitive failures, mass amnesia about Trump’s actual record, or, inevitably, disinformation spread by any number of bad actors at home or abroad (Glasser, 2024; Krugman, 2024b).2

    Even if my real wages after inflation went up two-fold, I wouldn’t vote for Democrats due to the war in Ukraine and the ongoing genocide in Gaza, let alone the CV Vax Mandate and the evisceration of the First Amendment. It may be the “economy stupid” for some, but not for me…an immoral polity must be brought down. Not that the Republicans are any better…I won’t even touch the “irrationality, cognitive failures, mass amnesia,” those are clear to anyone with a critical and historical eye.

  2. Amateur Socialist

    Here in southern VT, I have seen month to month how much guests to our little pinball joint are getting crushed by rent increases (the ones that still have housing, many people have been left homeless when their houses were sold and rents doubled or more). There is no effective rent control here but the 20+ year war on disposable income continues apace.

    You’d really hope at some point the people hiring would manage to have a conversation with the people renting apartments just to figure out who gets to stay on top. They seem to be warring each other if not themselves. In JR Biden’s America this is the perfect situation for his private equity friends.

    The condescension emitted by the people in charge of the Democratic Party towards working people will likely be reflected in their results in November. JR will get the retirement he has deserved for a decade and can finally start on the best selling memoir he will write blaming Putin for his shellacking.

    1. Cassandra

      JR will get the retirement he has deserved for a decade and can finally start on the best selling memoir he will write blaming Putin for his shellacking.

      Heh. Shouldn’t take too long to plagiarize What Happened .

      1. The Rev Kev

        By this time next year Biden won’t even remember that he was ever President.

      2. chris

        Ha! “What Happened?” by JR Biden.

        “No seriously, what happened? Last thing I remember Barack sent me to Detroit to talk to some dirty little mayor and now you people tell me I was president? Does Barack know?!”

    2. chris

      Talk to any parent about the difficulty of launching a kid into the world right now. Everything costs so much! How do you afford an apartment, a car, insurance, food, on the wages you earn as a new employee?

      1. ambrit

        “How do you afford an apartment, a car, insurance, food, on the wages you earn as a new employee?”
        The answer is simple, you do not. Welcome to the Return to the Second World for America.
        One relatively easy way to reduce the pollution burden arising out of the First World Industrial Age is to return the majority of the actual people to a Nineteenth Century standard of living. What’s the carbon footprint of a peasant? Many Americans are about to find that out soon.

        1. Laura in So Cal

          I’m seeing many many young adults living with their parents or in some way having parental support including young couples with children. All 3 of my immediate neighbors have more than one adult generation living in the house. One of my friends has her elderly mother with Alzheimers living with her while her son and his wife live in the Mom’s house taking care of it and paying the taxes + nominal rent which all together is still at least 30% below market.

          Honestly, This might not be a bad thing socially, but it is very challenging because it goes against societal expectations.

        2. Michael Fiorillo

          Setting aside the environmental implications of US-style middle class life, all of their material markers – the house, the car, the education for the kids, etc. – are rapidly becoming out of reach, while the lower rungs of the working class are being absolutely crushed. A new car costs what houses did not that long ago, fer crissakes. Meanwhile, the D’s are in willful denial – likely doomed by their structural contradictions – and the Repugs fill the ever-growing void with bile, misdirected grievance and spite… and call options on Entropy pay off big.

          1. Janey

            Re those on lower rungs being crushed. I got my hair cut today, and my regular beautician said she has had to take a second job because her customers are cutting back.

  3. chris

    This all ties into the fundamental questions we have needed to answer for our country for decades. What happens when most people can’t afford shelter? How should we fuel our economy? How do we provide medical care to our population when so few can afford it? How do we educate our population and who gets to pursue higher education? Why is there always as much money as needed for war but never any money for domestic priorities?

    I think about China popping its real estate bubble and protecting its people compared for what we’ve done. We can’t even mimic empathy for people who have been crushed by rising rents year after year after year. We can’t even break up obvious monopolies. The laborer is never allowed to get ahead.

    Life sucks in a failed state. What’s even worse is that none of the politicians who are running for office and have a chance of being elected show any awareness of these problems. Let a lone offer potential solutions. Trump may very well be elected by an angry people who demand change. They’re not going to get it.

    1. zagonostra

      Life sucks for some.

      I went on a bike ride on Jupiter Island this past weekend, from the Inlet to Hobe Sound Wildlife Refuge. I saw some beautiful homes on the beach and Intercoastal side that I can only imagine how it would feel to own. The owners probably have multiple houses. There are plenty of people doing just fine, it’s the masses that struggle, it’s the fallacy of composition that provides the necessary legerdemain that makes it all possible. It doesn’t matter that “most people can’t afford shelter” or afford education, healthcare, etc…there are many people that will fight tooth and nail to preserve what they have, they control the media, they control the politicians, and they control the prevailing ideas that get propagated and embedded into the majority’s minds/head.

    2. griffen

      Hey you get ridiculed and pilloried by the likes of Scarlett Johansson on an SNL skit following the State of the Union speeches… Republicans may possibly call out these problems, but in an election year they are really looking at the red meat to throw to their supporters.

      Bread and Circuses, worthy of Marcus Aurelius! Bring in the lions to the trumpet cries of “Democracy! Our Democracy!”

    3. Michael Fiorillo

      I’m no fan of Uncle Joe and the Ds, but those angry people who elect Trump will indeed get change, the majority of them getting it right in the neck.

      1. WG

        It’s quite likely the winner will be excoriated by the end of the decade and the loser will be taking a final “I told you so” lap.

    4. anaisanesse

      The only hope might be to vote for Jill Stein, the only antiwar candidate. Good interview on dialogue works with Michael Hudson may inspire some.

  4. ProNewerDeal

    What is the chance that Biden gets swapped out at the DNC Convention? It would seem that this tactic would have little downside risk. It seems that most Biden voters are VBNMW &/or LO2E/OrangeManBad! voters, that would support the replacement, as opposed to being Biden-specific die-hards. Biden lacks many Biden-specific “stans”, like Trump/Obama/Reagan did.

    Swapping out Biden would be Undemocratic, but Biden/DNC itself was Undemocratic in rigging the D primary, cancelling certain state primaries, no primary debates, etc.

    1. NotTimothyGeithner

      Zero. The President runs the party. These are people who can’t manage to grasp genocide is a bad look. Harris is among Team Blue’s best and brightest. It’s a clown show.

      The guy who serves at the pleasure of the president took unofficial paternity leave during transportation negotiations. These are people without ambition. They want to impress donors, but they won’t do anything to make them viable.

      Biden was rallied around because none of the lovers are credible. Clinton sleaze can’t work in the media environment, so no Clinton type is going to break through.

    2. Amateur Socialist

      I’ll see your zero and raise you “less than zero” to borrow the title of an old Elvis Costello tune. JR Biden and his advisers were not bothered by the look of “No Primarying the unpopular Democrat”, so it’s not likely he will be embarrassed at a DNC convention run according to the wishes of the bundlers and big donors.

      The “Election Show” will feature content that pleases the sponsors. As usual. Or is it “Show Election”?

    3. chris

      Biden would really need to do something that couldn’t be ignored. Incoherent screaming during a debate? Mindless motions walking around a stage during a fundraising event? Threatening to nuke an ally?

      The people who want nothing to fundamentally change will swap him out when they get the chance if it becomes clear he can’t win because of his infirmity. But OrangeManBad! and Abortion! will carry so much weight going into November that even though we could see really weird voting patterns Biden’s version of “Weekend At Bernie’s” might still win.

    4. Dr. John Carpenter

      The only way that happens is if Biden dies before the convention and they can’t figure out a way to “Weekend at Bernie’s” his corpse.

      1. Michael Fiorillo

        I had to restrain myself from saying, “Wait, you mean they’re not already doing that?”

    5. WG

      Unlikely there could be an agreement on who replaces him. Some serious infighting there and everyone would have to be on board with the process. And also be aware that everyone who works for Biden now wants to keep their jobs so would rather place their own personal hopes on that he can pull it out.

  5. Jean gingras

    Easy to become cynical when the actual solutions are off limits because ‘wealth’ does not want to talk about them. By ‘wealth’ I mean the ultra wealthy, political, judiciary(tax codes), banking quad team, which systemically prohibits the following ;
    -Establishing a single payer healthcare system.
    -Introducing rules and regulations to limit speculation in the residential home ownership sector.
    -Introducing a 2% minimum tax on large wealth.
    -Eliminating tax havens.
    -Introducing high taxes on large inheritances.
    IMO of course.

    1. flora

      I largely agree. These are regulatory and tax questions. These are political questions. If the ultra-wealthy are too wealthy to be affected by a rise in interest rates that wouldn’t cripple the economy then changes to the tax codes – both corporate and private could be an answer. That would be a monumental political fight neither party wants to touch, imo. It would upset their donor class.

      “We may have a democracy or we may have great wealth concentrated in the hands of a few, but we cannot have both.”
      former SC Justice Louis Brandeis.

      Democracy or ? oligarchy?

    1. TomW

      Aggregate statistics are an interesting starting point. Our national experiment with a Covid/ guaranteed minimum income resulted in an icy shower of inflation. That is my sound bite explanation of what happened. Personally, I ignore it to the extent possible.
      Underneath these aggregate figures, there are zillions of individual stories of winners and losers.

  6. lyman alpha blob

    Thanks for this. The intro describes pretty much exactly what I’ve been seeing in real live meat space. So have millions of others, yet all the politicians can come up with is better PR so we don’t believe our own lying eyes.

    The wage/price merry go round described here is exactly what the economist types would see if they had to go to the grocery store on their own. Yes, wages are increasing, but not as quickly as prices for things people actually need are. As far as wage increases primarily benefiting those at the bottom of the income scale, I can attest that my teenage kid is taking home about $25+/hour washing dishes (the place she works for generously adds tips for back of house staff). Very nice if you’re a teenager, but for an adult with paycheck deductions and the increasing cost of living to deal with, not enough to do more than barely get by.

    This –

    “Many observers also extol the President’s landmark policy achievements: Not simply the vast aid programs for ordinary Americans that his administration launched as it came to power, but the series of dramatic industrial policy initiatives that startled the rest of the world.”

    – calls for an MMT perspective. As the article mentions, it isn’t giving money to the millions of average citizens that causes inflation. Biden only dished out $1,400/per if I remember right (after promising $2k- the Cheeseparer in Chief still owes me $600), and that isn’t enough top throw the whole economy out of whack. A lot of people used it to pay down debt or just ease their monthly bills briefly. But those industrial policies, to name just one example, and which preemptively bailed out many business regardless of whether they needed it or deserved it, sent trillions of dollars into the hands of a relative few. That’s what causes inflation right there – people with more money than good sense buying up real estate sight unseen for well over the asking price, which happened al lot on my area from the wealthy trying to escape cities during the pandemic. Because the rich could afford it, now the rest of us have to pay a premium just for a place to live.

    From an MMT perspective, the money in circulation needs to have some correlation to the goods and services being produced by a society. Giving people a couple grand when the normal money flow seizes up allows the correlation to continue. Shoveling trillions at greedy bankers so their dubious financial instruments (definitely not a good, and I’d argue not much of a service either for most of these things [people can get along just fine if CDOs didn’t exist]) retain their overvaluations is what throws things out of whack.

    1. kam

      Seems the unstated corollary of “Too Big To Fail” is still kept well guarded under wraps. Government printed money (using the personal guarantees of the General Public) funded the self-appointed elites to buy out all competition, for ideas, information and products.
      The rest of you outside the Club are:
      Too Small to Exist.

      1. Lambert Strether

        > using the personal guarantees of the General Public

        That’s an interesting concept of democracy/legititmacy (not meant ironically). The right way of thinking about “backed by.”

  7. David in Friday Harbor

    Terrific post and comments that reflect reality as I’ve been experiencing it “on the ground” since the arrival of the pandemic. The elites can only see the “wealth effect” experienced by their peers and are callously indifferent to the precarity and impoverishment of the majority.

    But, as the Bald Bolshevik asked, What Is to Be Done? I think that we’re already seeing the spontaneous anarchy and spasmodic state repression of a collapse. I’m too old for this pschitt and have retreated to the countryside where I’m hoping to hide behind a tree…

  8. Mo

    Love this article. Of course every objective normal person already knew the economy sucks. But it’s great to have proof and even understand why.

    And is anything more perfectly predictable than liberals, rich and without a care, finger wagging at the suffering about being ungrateful trumpers

    1. kam

      Following the Buffet Dictum. Never invest in a business that has more than 2 competitors. Ergo Competition is Bad. Entrepreneurs are vulgarians.
      Accumulating Capital via Government Money Printing and Debt Conjuring for their select friends is far preferential than actually building a real business.

    2. flora

      A pie chart of US wealth distribution last year for context.

      U.S. wealth distribution Q3 2023
      Published by Statista Research Department, Apr 11, 2024

      In the third quarter of 2023, 66.9 percent of the total wealth in the United States was owned by the top 10 percent of earners. In comparison, the lowest 50 percent of earners only owned 2.5 percent of the total wealth.

      This is no longer a middle class country. This wealth shift was engineered over 30-40 years by political decisions and neoliberal excuses for changes in public economic policies.

  9. Fastball

    I’ve gotten raises since COVID, each was 3% or less. Since inflation has been running at 5, 6, 7, 8 percent … my wages have actually fallen.

    Meanwhile my rent has increased by over $100 a month every year and my health care spending has doubled.

    My plan is to move to a part of Mexico, if there is any, not overrun by drug cartels, when I “retire”.

    1. kam

      Not only have real wages/purchasing power fallen, but little mention is made of the long term Covid Economic Disease.
      1. By killing Small Businesses, billions/trillions of income that once came from talented, know-how type of people, has ceased to exist. Most have said enough-is-enough or no longer have anything left to float the boat.
      2. Economics 101. Raising prices because costs have risen, reduces demand, reducing revenue through lower volume/receipts, therefore, an economic doom loop of raising prices, lowering demand is set in. That is what is going at your local Restaurant and McDonalds. Even if Revenues appear to be up, the number of hamburgers is down. Everywhere.
      3. The promise of America has been broken.

    2. Mario Golden

      Thank you so much for essentially summarizing the article in your comment. If you go to Mexico after retiring, please be sure to contribute to the well being of poor Mexicans, and not to the massive gentrification going on in part caused by (undocumented) “ex-pats” paying higher rents and prices, etc. and displacing people and local businesses without ever paying any taxes.

      1. JBird4049

        >>>“ex-pats” paying higher rents and prices, etc. and displacing people and local businesses…

        I believe that this is also happening in the United States as the wealthier people move about internally or from outside looking for either a nicer, comparatively cheap, place to live or to use property for wealth storage. The moving to Mexico is a knock-on effect.

    3. Lambert Strether

      > My plan is to move to a part of Mexico

      My advice to all readers, FWIW: Make sure you have a passport (and if you’re close to renewal, renew). Your family, too. Think of it as having options you would not otherwise have.

  10. Jason Boxman

    The present study treats COVID only as much as necessary to understand debates about low wages; we leave its broader effects on labor markets for a subsequent paper.

    I look forward to that; There must be some knock-on effect from an ongoing Pandemic, and I’m curious what they see in the data.

  11. marku52

    Economists that actually live on This Planet. I thought they were extinct.

    Good article!

  12. dao

    The problem with the BLS figures is they can’t be trusted. Any measure of wages today versus 3 years ago is meaningless if the data on wages or the inflation rate is no good.

    The BLS tells us that inflation has been 18% over the last 3 years which is about when inflation started taking off (early 2021).

    I can’t think of many things I spend money on that have gone up only 18% in the last 3 years. Yet, I can think of a lot of things that have gone up 30-50% (or more).

    My own personal wages have not gone up 18% in the last 3 years, so not only am I behind what the BLS is calculating as the inflation rate, but I’m way behind on the expenses I’m actually experiencing.

    Multiply my experience by the millions and you’ll find there is a lot of discontent out there and it isn’t due to an “incorrect perception” of the economy.

  13. Phil

    More irrelevant minutiae re: why Biden should not be re-elected. Inflation has been a worldwide phenomena and will continue to be until – of ever – we get supply chains back in sync per the pre-COVID era. I don’t know if that’s possible because there are serious systemic problems that are being made worse by war, labor shortages, etc.

    Perhaps the author should read this?

    Things aren’t great these days, but how anyone in his/her right mind could wish for a return to the days of Trump and the ignorance that surrounded him is beyond me. Neoliberalism is a cancer, possibly curable via serious surgery; fascism is Stage 4+ – a terminal death sentence.

    1. juno mas

      How does the US get the supply chains back in order, harassing China by sending munitions to Taiwan and increasing tariffs on their goods?

      The post is focused on the US. Global inflation isn’t it’s concern. Both articles a clear that the Fed raising rates threatens a recession at home, if not globally.

      People will vote for Trump (or Biden) because those are the choices.

    2. chris

      What did you find fascist about the Trump administration that you don’t find equally if not more awful in the Biden administration?

      Biden has cut support for people to force them to work in unsafe conditions. Biden has supported corporations denying healthcare and paid sick leave to their workers. Biden has pursued the interests of Israel and Ukraine against domestic protestors and journalists. Biden has violated our own laws to supply weapons in conflicts the American people and Congress have not approved us being involved in. Biden has bailed out banks that didn’t deserve it while he still owes the citizens money for past promises. Biden is busy preparing tarrifs against China with no compensating domestic industrial program so that people will be further immiserated and forced to work more in unsafe environments. Biden has orchestrated a complete denial of facts, narratives, and studies that contradict his administrations positions on domestic and foreign goals. Biden has suffocated any attempted challenges to his role in the Democrat party, or from third party candidates. Biden keeps engaging in policy that could result in us experiencing nuclear war, despite the fact that there is no support for that in the polls or the people. Biden is abusing executive privilege to protect his family and attack his political opponents. Biden keeps going on TV and telling the citizens to stop thinking for themselves and just believe what he’s telling them…

      I could go on and on and on.

      You’re worried about American fascism? The only thing we’re missing with Biden is a popular cult of personality. And I’d argue he has that, just not with the citizens.

      Trump is a fool. He will be far less effective with respect to rolling up our rights and freedoms. That doesn’t mean he won’t be dangerous. That doesn’t mean bad stuff won’t happen if he’s elected. But this idea that somehow we avoid all the negative consequences of Trump being re-elected if we keep Biden is ridiculous. Nearly every knee jerk fascist fantasy the liberals worried about with Trump is occurring under Biden. Stop propping the old fool up with statements that support his “existential” election against another old fool.

      Fascism is here. It won’t leave until major changes are made in this country. And the only way that happens is by going through a period of chaos. God help us.

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