August 19, 2024
No one expects serious economic analysis from the Washington Post’s conservative columnists and Mark Theissen doesn’t let us down.
Theissen starts off by reminding of one of Larry Summers’ most embarrassing moments:
“Nonetheless, as president of the Senate, Harris cast the deciding vote to pass the catastrophically misnamed ‘American Rescue Plan’ with only Democratic votes — a reckless $1.9 trillion social spending bill that even former treasury secretary Lawrence H. Summers, who served in both the Clinton and Obama administrations, warned would ‘set off inflationary pressures of a kind we have not seen in a generation.’”
Summers almost certainly regrets this warning. He recently commented that the Biden-Harris administration has a “remarkable record” on the economy. Summers’ main concern was that we would get a wage-price spiral like we had in the 70s. This upward spiral only ended when the Fed pushed interest rates through the roof, and we got double-digit unemployment.
As it turned out, Summers was wrong. Inflation has largely fallen back to its pre-pandemic pace. We have not seen a wage-price spiral. While unemployment has risen from its 2023 low, its current 4.3 percent rate is still quite low by historical standards.
But this is only the beginning of Theissen’s shoddy economics. He tells readers that the saving rate has fallen to a near record low. Theissen actually can find support for this in the data, but only because he apparently does not understand it.
Saving is defined as the portion of household disposable income that is not consumed. In the last two years there has been a large gap between GDP as measured on the output side and GDP as measured on the income side. The two measures are by definition equal.
At this point, we don’t know which is close to the mark, but for calculating the saving rate it doesn’t matter. If output has been overstated that it almost certainly means consumption has been overstated. If true consumption is less than reported consumption then the saving rate is higher than is now reported.
On the other side, if income is understated then disposable income will be understated, which would also mean that the saving rate will be understated. When we adjust for this gap between output side GDP and income side GDP, the current saving rate is roughly the same as before the pandemic.
Theissen then tells us:
“Meanwhile, consumer debt has reached a record high of $17.8 trillion — a $3.15 trillion increase since Biden and Harris took office.”
The trick here is that, unless we are in a recession, household debt is almost always hitting record highs, as it did throughout the Trump administration, until the pandemic. Economists usually focus on net worth, which are assets minus debt, which is at a record high far above the pre-pandemic level.
He notes the rise in grocery prices, but somehow can’t get data on wage increases, which for production and non-supervisory workers have been roughly the same. Theissen also highlights the great economy when we were still in the pandemic recession and mortgage rates were low, but unemployment was high.
Anyhow, I realize no one expects serious economic analysis from Mark Theissen, and he didn’t let anyone down.
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