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Thursday, July 18, 2024

Cookie Monster has a better grasp on the economy than Joe Biden

OpinionCookie Monster has a better grasp on the economy than Joe Biden

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Last week’s shoutfest of gaslighting and straight-up lies, known as President Biden’s 2024 State of the Union address, was a continuation of shoving economic nonsense down the throats of Americans.

During his entire tenure, Biden and his mouthpieces have tried to blame just about everything for inflation, except the actual culprits, which include his fiscal policy alongside damaging Fed monetary policy.

We were told there would be no inflation, that it would be “transitory,” that it is good for you and only hurts the rich, that it was the consumers fault, it was business’ fault, it was Putin’s fault and it was backward looking – among other nonsense trying to justify the erosion of the middle and working class’ purchasing power. 

Cookie Monster

Sesame Street’s beloved Cookie Monster tweeted his exasperation with inflation. (Nathan Congleton/NBC/NBCU Photo Bank via Getty Images)

Biden has returned to trying to single out corporations as a cause of inflation. When Sesame Street’s beloved Cookie Monster tweeted his own exasperation with inflation in the form of shrinkflation, leading to smaller cookies (yes, even fictional characters are being impacted by it), Biden’s team jumped on it (and yes, responding to actual puppets is where discourse is at in 2024).

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He blamed corporate America and greed for this outcome.

But shrinkflation is a downstream effect of inflation. When inflation takes hold, due to irresponsible monetary and, as is in our case, fiscal policy, corporations first try to raise prices to keep pace. But, at some point, consumers aren’t going to pay more for a candy bar, bag of chips or frozen pizza. 

Eventually, instead of pushing up the purchase price, the price increases are taken on a per ounce basis (or a similar metric). Keeping the headline prices in place then means you receive less product for your dollar. You may find that an $8 frozen pizza is now a third smaller.

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In trying to blame corporations, Biden is talking out of both sides of his mouth. When he claims the economy is doing better and the GDP is growing – well, that would mean the corporations are growing as well. 

When he highlights that wages are increasing, that obviously creates higher costs for businesses that they then pass on to consumers. It’s all related and he can’t claim economic victory and then chastise the businesses for their growth.

Moreover, corporate profits aren’t increasing at a materially higher rate than during other times. When prices increase, that will drive sales growth. Keeping margins constant, more nominal earnings will be had by corporations. Again, downstream outcomes of inflation.

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According to Factset, Q3 2023 marked the seventh consecutive quarter that the S&P 500 reported lower profit margins. At the same point in time, YCharts shows lower U.S. corporate profits after tax as a percent of GDP than when Biden took office. And Gurufocus, using Bureau of Economic Analysis data, shows a shrinking corporate profit margin during the time period inflation was raging under Biden.

The idea that corporations just decided to become greedy is always a stupid talking point. If someone is charging too much, another company would come in and sell at a lower price at the same quality to take market share if they could.

Also, why would they just become greedy now, particularly in the last couple of years as the purchasing power of consumers has dwindled due to inflation?

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It’s, as Biden likes to say, malarkey.

But that’s not stopping Biden’s authoritarian ways. Instead of taking ownership of the mess he has created, he is using his gaslighting as an excuse to move us further away from free markets.

Biden announced last week a task force led by both the FTC and the Justice Department on corporate pricing (notably absent is any focus on government spending and pricing). The focus of this endeavor is to not only crack down on illegal pricing, but “unfair” pricing, whatever that is. 

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As we know, the concept of “unfair” is completely subjective. In terms of government, unfair is a weasel word to allow them to further pick winners and losers, and do more stupid things that would ultimately hurt the economy, like institute price controls (which always leads to bad outcomes, like goods rationing, etc.).

Consumers aren’t stupid and gaslighting them adds insult to injury. We all know what caused inflation and who is to blame, whether we are on Main Street or Sesame Street.

CLICK HERE TO READ MORE FROM CAROL ROTH 

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