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9 February 2024

The truth about Sleepy Joe

Bidenomics is working far better than our government’s lack of an economic plan.

By Will Dunn

Joe Biden, 81, has been forced to defend his cognitive state after a special counsel’s report into the unauthorised storage of classified documents – which concluded that “no criminal charges are warranted” – described the US president as “an elderly man with a poor memory”.

The language is damning and the report is just the latest example of the vicious tenor of US politics. The special counsel Robert Hur saw fit to ask Biden if he could remember what year his son had died, a question that Biden told a press conference he had found shocking: “How in the hell dare he raise that?” he asked.

The politics of this report and the question of Biden’s age are one thing, but for the rest of the world one line from Biden’s press conference should jump out: “I know what the hell I’m doing… I put this country back on its feet.”

In this he has a point: America’s economic recovery from the pandemic is the envy of the world. Real-terms GDP growth in the US has been more than three times that of the UK, employment has been robust, and inflation has been addressed faster and more conclusively than in any other advanced economy. While Europe stagnates and China experiences rapid deflation (falling prices might sound nice, but they cause economists to wince), Bidenomics has been a roaring success.

America’s head of state may be gaffe-prone, but he is surrounded by a high-performing team. The same cannot be said of our own Prime Minister: witness the failure yesterday by the Chief Secretary to the Treasury (Laura Trott, 39) to grasp that her own government’s spending plans will not reduce the country’s net debt by the end of the next parliament. The senior Treasury minister in charge of public spending should understand that her own spending plans only imply a fall in debt as a proportion of GDP in the last year of the parliament, but when Evan Davis pointed this out yesterday afternoon, Trott’s response was: “I think I need to have the figures. I’ve got different figures which… I think we just need to… yeah.”

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Further evidence of the Conservative Party’s economic illiteracy arrived this week in the form of a report from the Pensions Regulator, which found that the value of assets held by defined benefit pension funds fell by £425bn (that’s four hundred and twenty-five billion) during 2022, primarily as a result of the changing value of gilts (UK government bonds) after the tax cuts implemented by Liz Truss, 48, and Kwasi Kwarteng, 48, put the UK’s national debt on a unsustainable path. (To be fair, funds’ liabilities also fell – the drop shows how drastically policy tilted the economy, rather than an absolute loss.)

The idea that further tax cuts are affordable is so laughable that even the Confederation of British Industry, not known for its membership of the Woke Blob, has urged Jeremy Hunt to disregard them in favour of green investment.

Part of the reason businesses in the UK want this to happen is because they can see the effect that such policies have had in the US. The American Rescue Plan and the Build Back Better Act comprised trillions in additional stimulus that have put the median American consumer in a materially better place than before the pandemic. The US government’s surveys of consumer finances show a historic gain in inflation-adjusted wealth between 2019 and 2022, while average real family incomes rose 15 per cent.

Two nights ago I spoke to the former White House economist Claudia Sahm (we’ll publish the full interview soon), who is such a leading authority on predicting recessions that a key recession predictor, the Sahm rule, is named after her. Sahm told me that while she is not political aligned, it’s impossible to ignore the achievement of the last few years: “Inflation came down without a recession; that is not in the historical precedent.”

This isn’t only to Biden’s credit – the fiscal stimulus under the Trump administration was also important – but the additional stimulus of Bidenomics has been transformative for the US. Biden’s administration has managed energy prices in a way other countries have failed to do, using strategic reserves and increased production. His core voters don’t love this – having voted for a “green” president, the US is producing more oil than ever before – but it is an adept short-term response. In the UK and Europe, the answer has been to get mangled by energy prices and then blame the green policies, which is even worse for the biosphere in the long run.

I would swap our sprightly young PM for an octogenarian who sometimes falls over if it also meant swapping the UK’s economic stagnation for GDP that is growing five times faster (US GDP was an annualised 3.3 per cent in 2023, vs 0.6 per cent in the UK). So he forgets things? Big whoop!

This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here.

[See also: The Trumpian end of the liberal world order]

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