LARRY KUDLOW: Does President Biden understand budget economics?


Joe Biden was out there today crowing about job numbers that really don’t even exist. As you know, the topline number for non-farm payrolls was 253,000 – which would be a good number, except for the fact that the prior two months, March and February, were revised lower by 149,000 (a 78,000 downward revision in February and another 71,000 in March). 

So the net increase for April is really only 104,000. That’s a big difference. And, I think, Mr. Biden notwithstanding, one reason the stock market rallied 500 points is the market is smarter than President Biden, believe it or not, and knows that when you look under the hood it was a much softer number. And that softer number will take the pressure off the Fed and encourage them to pause their tightening. Now, the unemployment rate remains low at 3.4% but the household small business job number was also soft at 139,000. Here’s what Mr. Biden either does not understand, or simply refuses to acknowledge: middle-class and blue-collar real wages have been underwater for the entire duration of the Biden presidency.  

As the accompanying chart shows, blue-collar real wages have fallen 2.1% under Joe Biden. Under former President Donald Trump, blue-collar real wages exploded by 7.3%. Falling real wages have always been the soft underbelly of the Biden economy. People are working, and that’s a very good thing indeed, but inflation has eroded their real income take-home pay. Just take gasoline, groceries and other necessities. That’s the problem for Biden. Living standards have fallen. That’s the problem for Biden. If this election is about pocketbook issues, or kitchen table issues, as presidential elections invariably are, then Donald Trump, if he stays on message, can defeat Joe Biden.   

Trump has a track record here, Biden does not. Trump did it once, and he could do it again. I don’t know the outcome, my crystal ball is as cloudy as anybody’s. I’m just repeating what the Wall Street Journal’s Gerry Baker said this week about the importance of pocketbook issues and the possibility of a President Trump victory. Meanwhile, if you ever doubted that Mr. Biden does not understand budget economics, just take a look at what he said today:   

“MAGA Republicans in Congress are threatening to undo all this progress by letting us, quote, default on the debt unless we agree to their demands. The two are totally unrelated. Whether you pay the debt or not, doesn’t have a darn thing to do with what your budget is. Where are you going to spend money? How are you going to raise the money? What are you going to cut? Where do you gonna – that’s they’re two separate issues.” 

Oh, Lord, please make it stop. Of course, the two are linked, Mr. Biden. How much you spend determines how much you have to borrow. Higher spending forces higher debt. Right? You cannot separate the two. Now, as is usually the case, Mr. Biden is blathering on about all the horrible things these awful MAGA Republicans are going to do to various interest groups with the Kevin McCarthy GOP proposal, the Limit, Save, Grow Act. So let me make a point right here: Democrats always oppose any form of budget restraint. A second point: Joe Biden doesn’t want to cut a single nickel out of the roughly $6 trillion of spending that he’s managed to rack up in a short two-year period. Not a nickel. Which is very sad. Because, if left alone, he will bankrupt the country. Now, here’s a third point: the GOP House proposal doesn’t stop spending. It stops the rate of spending. In other words, over 10 years, the level of spending in the federal budget is going to go up. But the GOP would put a speed limit on the spending with a cap of 1% per year.   


Frankly, virtually nothing’s going to be cut, in a sense that a family budget would be cut. It just means the increase will be slower. And, of course, the Democrats have so many left-wing itches to scratch that their feeble coalition won’t even permit a slower spending speed limit. But the GOP is exercising common sense. And the public is behind them. So every time you hear Biden talk about spending cuts, you know he is wrong. He just won’t drive under the speed limit.   

Now, final point. The Wall Street Journal’s Greg Ip hits the nail on the head when he writes that ‘a debt deal could help solve the country’s inflation problem. Spending cuts could prompt the fed to cut interest rates sooner easing some of the pressure on banks.’ Again, my only correction is they’re not real spending cuts, but putting a speed limit on the federal budget. That should be something that the Fed’s Jay Powell strongly favors, and I think the whole stock market would love a less inflationary budget policy. For the life of me, I don’t know why Jay Powell doesn’t come out and say this. Save America. Pass the McCarthy bill.  


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