When Paul Krugman isn’t busy trying to pretend that year three of the worst inflationary crisis in 40 years is merely transitory, the once-esteemed Nobel laureate is trying to justify said inflation with the supposed sole benefits of “Bidenomics“: Namely, we’ve achieved the white whale of full employment while shrinking income inequality.
There’s just one problem. Despite years of people pretending to care about the income gap between stoned fry cooks and the job creators who employ millions, it turns out we actually hate full employment and lessened income inequality when it comes at the cost of price stability and, thus, the value of our savings and paychecks.
Krugman and other liberal pundits have repeatedly boasted of research by David Autor, Arindrajit Dube, and Annie McGrew indicating that about 40% of a post-Reagan rise of income inequality has been reversed since the start of the pandemic, lauding full employment for increasing the bargaining power of the lowest-income workers who usually have a less tight labor market. But while the lowest-income workers have seen a tiny gain in their economic standings, the rest of us have paid dearly.
Overall, prices are up 17% since President Joe Biden took office, with food prices up 20% and energy prices up 32%. Average real wages overall are 3% lower than their April 2020 peak and 2% lower than the pre-pandemic trend. On top of those thousands of dollars of losses just in real wages, the regulatory costs of Bidenomics have amounted to $10,000 annually per average household, per University of Chicago professor Casey Mulligan.
And it’s not because lower unemployment is inherently inflationary. Although the Federal Reserve remains obsessed in its adherence to the Phillips curve, the supposedly inverse relationship between the unemployment rate and inflation does not account for a disproportionately aging economy dependent on young workers funding the generational wealth transfer known as Social Security and Medicare. David Simon also plausibly attributes the breakdown of the Phillips curve to the distortion of price signals wrought by inflation, which, in turn, brings about market inefficiencies that play out in a variety of ways.
In the case of Bidenomics, the problem is an artificially depressed labor force participation rate. Then-President Donald Trump achieved a healthy level of “full employment” before the pandemic with no corresponding increase in inflation simply because older people still retained their jobs. The pandemic-era spending spree falsely inflated home prices, allowing a bevy of boomers to cash out of the economy and employment prematurely, further taxing our welfare system. Thus, we have fewer workers paying into a generational wealth transfer funding a greater number of retirees, most of whom are wealthy without such handouts.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Sure, on the one hand, we have some zoomers making $17 an hour at McDonald’s jobs that will likely be automated away by the end of the decade. On the other hand, we have soaring child labor trafficking, skyrocketing food prices, pissed-off customers, and workers losing the equivalent of one biweekly paycheck per year thanks to the cost of inflation.
Americans are a kind bunch, but more importantly, we wish to be perceived as a benevolent bunch, so it’s unlikely that we’ll dispel the canard that declining income inequality should take precedence over the stability of our own savings. But the revealed preferences of rock-bottom enthusiasm and confidence in the current economy would indicate that, in actuality, we all correctly hate this iteration of full employment reducing income inequality.