The Washington Post’s third-rate “fact-checker” Glenn Kessler butchered the facts when he claimed that the sky-high inflation brought on by Bidenomics barely made a dent in Americans’ spending power. Economists interviewed by MRC Business were having none of it.
Kessler went after presidential candidate Sen. Tim Scott (R-SC) for his nuanced assertion during the GOP presidential primary debate that the average American family has lost “$10,000 of spending power” in President Joe Biden’s economy. “This seems wildly overstated,” objected Kessler. He then attributed Scott’s argument to an analysis by Heritage Foundation Research Fellow EJ Antoni, estimating that American families have lost roughly $7,000 in spending power since Biden first took office. Without being specific, Kessler vaguely pointed to some string of “economists we contacted [who] were dubious about the math, which relied on a change in purchasing power and a change in borrowing power.” But Kessler’s true-to-form retort to protect Biden would be fallacy-riddled and devoid of context that would actually blow up his argument.
MRC Business reached out to Antoni, who, in his response, didn’t mince words about Kessler’s shoddy argument. Kessler’s assessment of the numbers is “just flat-out wrong,” rebuked Antoni. Kessler “should know better,” Antoni reproached. “I literally explained [my calculations] to him both on the phone and via email in a previous conversation. I explained how these figures are actually calculated.”
Kessler whined about Antoni’s use of average weekly wages in his calculations. “[T]his measure does not follow the same workers across time,” Kessler ridiculously complained. “Uh, it’s a nationwide average,” Antoni said of his analysis in response, calling Kessler’s criticism “odd.” “I’m talking about all workers here. So unless someone has just entered the workforce within the last couple of years or exited the workforce within the last couple years, yes! I am talking about the same workers over time.”
Antoni explained that his metric “looks at average weekly earnings and then adjusts for inflation. The reason I use weekly earnings instead of just hourly earnings is because hours have been steadily getting cut recently,” he said. Antoni noted that looking at weekly earnings is a “much better metric to use because it represents what people are actually taking home in their paychecks, again whether you’re talking about a week, a month or a year.” The alternative would be to look at hourly earnings, which Antoni reasoned would distort the economic outlook: “If all you’re looking at is hourly pay and that’s going up while the number of hours your employer gives you to work is going down, your actual weekly earnings — and therefore your yearly earnings — could be going up or down depending on which factor is outweighing the other.”
In his fact-check, Kessler claimed that Antoni’s math “relied on a change in purchasing power and a change in borrowing power. The change in borrowing power relied on mortgage rates — and not every family is looking for a new home.” Antoni critiqued that “borrowing power,” as described by Kessler, “is a made-up term, so I’m not sure what he means by that.” The Heritage Foundation economist ripped Kessler apart for implying that the financing cost component Antoni analyzed, which Kessler related to “borrowing power,” was based solely on “mortgage rates.” Antoni’s analysis actually factored in “all borrowing costs” and not just mortgage rates. “There’s mortgages. You have your home loan, your student loan, your auto loan, your credit cards. This looks at much more than just mortgages. I’m not sure why [Kessler] thinks that mortgages are the only component to that.” [Emphasis added.]
Kessler’s attempt to downplay how “not every family is looking for a new home” just didn’t pass the smell test. “If you are one of the poor suckers looking for a new home,” said Antoni, “then you really are getting crushed right now.” Comparing what families in this demographic bring home in income over the course of a year and what they could buy to when Biden took office would mean that they’re over $5,000 worse off today, Antoni stated. “If you’re trying to buy a home today, the monthly mortgage payment on a median priced home today has literally doubled since Biden took office. So it will cost you $12,000 a year, every year for 30 years — that’s $360,000 more for the exact same house.”
Kessler distorted data to make it appear that inflation’s effect on spending power was negligible: “Several economists pointed to another metric — real disposable personal income per capita — as a better gauge,” based on data from the Bureau of Economic Analysis (BEA). Then came the kicker: “Per capita income, after inflation, was $46,790 in December 2020 and $46,795 in June 2023 — an increase of $5. That’s basically flat — but a far cry from a $10,000 decline.” But here’s the problem: Kessler’s time period uses December 2020 as a baseline, before Biden was even in office, and before “Bidenomics” ever took effect, which is what Scott and Antoni were addressing in their arguments. [Emphasis added.]
Manhattan Institute Senior Fellow Brian Riedl was blunt in comments to MRC Business that Scott was correct in his assessment and Kessler was wrong:
I understood Sen. Scott to suggest that inflation has cost the typical household roughly $10,000 in higher prices over the past two years. Using the economist rule of thumb that each 1% of higher inflation costs the typical household $650 annually (which renews the next year as prices remain elevated) produces a figure of roughly $10,000 in higher prices (compared to under the typical 2% inflation) since Biden took office. Sen. Scott is correct, [emphasis added].
One needs only to look at data from the St. Louis Federal Reserve’s FRED data to see just how wrong Kessler’s argument is. By using December 2020 to incorrectly assert that Americans’ average real disposable personal income (per capita) (RDPI) increased $5 by June 2023, he left out the fact that Americans real disposable income actually spiked upward to $51,505 in January 2021 when Biden first took office as the economy was recovering following the COVID-19 pandemic and lockdowns. And this was before Biden’s policies were enacted. Using BEA data — “when Biden takes office — the economy is growing at a $1.5 trillion annualized rate” if one were to annualize the two quarters of recovery prior to Biden taking office. “We had fast growth and low inflation” prior to Biden’s policies reversing that trend, Antoni argued.
Since January 2021, after another even larger upward spike in March 2021 ($57,872), just when Biden’s inflation-causing $1.9 trillion stimulus package became law, real disposable personal income nosedived $6,303 to a low of $44,902 in June of 2022. That’s beneath the December 2020 figure Kessler cites, before it recovered slightly to $46,795 in June 2023. If one were to use the March 2021 spike as the baseline ($57,872) when Biden’s stimulus became law, Americans have lost $11,077 in real disposable personal income as of June 2023.
Antoni agreed that Kessler was effectively cherry-picking the dates in order to mask the true effect of Biden’s inflation-rattled economy on RDPI. “If you torture the data enough, they will confess,” Antoni said of Kessler. “He can come up with whatever manipulation of the numbers that he wants but at the end of the day the numbers are what they are.”
But even if Kessler or others wanted to insist that economists should use December of 2020 to remove an alleged pandemic-era distortion that led to the January 2021 spike, the argument still falls flat. According to Antoni: “If you really want to remove all of the pandemic-era effects, then what we should be using — if that’s really [Kessler’s] goal here — then what we should be using is the pre-pandemic trend [not just December 2020].” Once this is applied, America is actually “way down from the pre-pandemic trend. We have not actually fully recovered.” Kessler, said Antoni, “had no response to that.” Using January 2021 as the basis for analyzing the Biden administration, said Antoni, wasn’t really “grossly distortionary” at all because the spike in RDPI wasn’t a one-off event, as the March 2021 figure ($57,872) illustrates.
Even if readers were to take Kessler’s argument of a “flat” effect based on his cherry-picked date periods at face value, it’s not the positive picture he’s making it out to be. “Even if you want to use [Kessler’s] numbers of December 2020 and you want to say, ‘Okay it’s been flat for two-and-a-half years,’ that’s actually horrible,” Antoni told MRC Business. “What it’s saying is over the course of two-and-a-half years, millions more people started working. So you have millions more, or hundreds of millions, I guess, more man hours per year of work being done and yet the actual amount of real income people are receiving hasn’t changed.” What Kessler’s argument is really suggesting is that more people are working but the amount of real income per person “hasn’t budged in real terms” because of what the government has taken through “the hidden tax of inflation.”
Kessler’s argument gets even more ridiculous in light of other data. A July 2023 LendingClub report found that “61% of consumers lived paycheck to paycheck as of June 2023, with 21% struggling to pay their monthly bills.” The “61%” figure is unchanged from June 2022, according to the report. But it gets worse: “Among consumers earning $50,000 to $100,000, 65% lived paycheck to paycheck as of June 2023, compared to 60% in June 2022.” The LendingClub directly attributed this phenomenon to “rising prices.”
“Basically flat,” eh Kessler?
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