Surber nails it.
Household income dropped 10.9%
donsurber.blogspot.com
Jen Psaki and the rest of this vagabond administration can write "We are not in a recession" 100 times on their blackboards, but we likely are. It takes 6 months to know this and we are only 4 months in. By the end of July, we will know for sure.
The 1.4% drop in economic activity so far this year is likely worse. The economy is fluffed up by consumer spending, which rose 2.7%.
But consumer spending is not keeping up with inflation, which rose 8.5%.
This reflects the drop in household income.
Market Watch spun the drop this way,
"Over the last four quarters, the purchasing power of after-tax household incomes plunged by $2.2 trillion (in 2021 dollars). That’s a 10.9% decline, by far the largest in the records dating back to 1947.
"Of course, the decline in incomes is merely the unwinding of the massive support that households received from the government in 2020 and 2021 via direct pandemic stimulus payments, the child tax credit, and enhanced benefits for unemployment insurance, food stamps and Medicaid, and more.
"This means that the Fed is chasing a shadow. Because if our current spike in inflation is all due (as many people argue) to an overly generous federal government giving its people too much money, then our inflation problem is about to go away."
The problem is the federal government did not give everyone 10.9%.
In the past year, it gave out no stimulus checks. So just about everyone had to eat that 10.9% drop in household income.
As for inflation suddenly going away because the federal government suddenly will stop spending, that is not about to happen.
The federal government received record tax revenues these past 6 months and it has also set a record in borrowing. The national debt (that accumulation of all the deficits over the years) surpassed $30 trillion.
The last balanced budget was 21 years ago.
We have borrowed $25 trillion since.
We also run up trade deficits with Red China that top $1 trillion every three years. The U.S. economy lost its independence. We now rely on ships from Red China to bring us the stuff we buy at Dollar General.
That 10.9% drop in household income is a Biden tax. It is a harbinger of a recession we have not seen in 90 years.
The only way out is to stop federal spending. Biden won't. We will see if a Republican president and Congress are willing to do so.