As we've said many times on this show: Americans are smarter than Joe Biden thinks they are. No matter how many displays of cognitive dissonance from Mr. Biden or falsehoods or — to use a word I don't like to apply to presidents, but must in this case — outright lies, Americans see right through it.
You simply cannot tell the public that there is no inflation when prices for food, groceries, electricity, natural gas and cars are rising sharply. Even with the recent drop in gasoline prices, they're still up 26% over the past year. As a result, working folks have been forced to take a 3.4% pay cut during that period.
That's why I don't blame the railroad union workers for demanding higher wages. They're just trying to catch up to higher prices. They don't control the government spending and monetary spigots. They are victims of very bad policies.
Mr. Biden's zero-inflation "celebration" on the White House lawn is a slap in the face of these people. When he says he "inherited" an economic crisis and turned it into a "resurgence," it's just factually wrong. Folks know this. Factually, he inherited a V-shaped resurgence from President Trump and turned it into a crisis. No amount of James Taylor songs are going to change that.
The economy was growing at roughly 6.5% in the first quarter of 2021, with about 1.5% inflation. So far this year, the economy has contracted into negative territory and more may be coming. The Atlanta Fed's GDP tracker has been marked down for the third quarter from 2.6% to just 0.5%.
The CPI is rising 8.3% ahead of a year ago, and of course people feel this in their bones and their budgets. The Cleveland Fed's median CPI, which is a very useful measure of core inflation, is now up to 6.7% after rising month after month and, as the economy sinks into recession, we are experiencing a price-wage spiral that is embedded into the economy. Milton Friedman called this "inflationary recession." Nowadays we call it "stagflation" and Biden Democrats are now at war with the Federal Reserve.
The former keeps spending and borrowing like there's no tomorrow, while the Fed is tightening money. This is not good. Actual inflation is three to four times the Fed's 2% target and Team Biden is giving Jay Powell & Co. no alternative but to tighten even more aggressively, which is going to harm the economy even more, which is frankly not what anybody wants, including me.
Instead of opening up all the energy spigots or reducing taxes or removing business regulations, the Bidens are closing the spigots, raising taxes and marching toward big-government socialism with their massive central-planning regulatory assault.
For now, the supply side is dead, while Democrats scratch every radical, progressive programmatic itch they can. Think of it this way: the economy has no oxygen. Its veins are completely clogged and Mr. Biden continues to say this isn't so, but the facts clearly speak otherwise. Again, Americans are not stupid. Now, take a listen to a leading Biden ally. See it for yourself:
HILLARY CLINTON: "This midterm election is going to have a lot of energy from women and men who don't want the government, don't want politicians like Abbott or someone else coming into their lives. Enough with the nonsense of sending these poor Venezuelans to Martha's Vineyard or excusing a former president who has stolen classified information."
With the greatest respect, Madam Secretary, these left-wing causes are not going to drive the midterm election. Of course, I respect those voters who agree with you, but this election is going to be an inflation election, a recession election, an economic election. There are lots of issues in the air but none will be as dominant come November as America's economic descent.
Let me end on an optimistic note. Biden's failed policies will be changed. Why? Because the vast majority of folks know they must be changed. Men and women of good faith and common sense are going to change them simply because people know change is absolutely essential to making America great again. That is why the cavalry is coming and that's my riff.
This article is adapted from Larry Kudlow's opening commentary on the September 16, 2022, edition of "Kudlow."