Bidenomics: A Wealth Effect Fizzle

As President Biden's term nears its end, it's time to assess the impact of his economic agenda, known as Bidenomics. While the U.S. economy has seen job growth and wage increases, the wealth effect, a crucial driver of economic growth, has been notably absent. Let's delve into the reasons behind this fizzle and explore the potential implications for the 2024 election.



The wealth effect, a phenomenon where households spend more as a result of rising asset values, has been a significant driver of economic growth in the past. However, under Bidenomics, this effect has been largely absent. Several factors contribute to this fizzle:

1. Inflation: High inflation erodes purchasing power, making people feel poorer and less likely to spend. The Biden administration's early fiscal policy, such as the American Rescue Plan, has been criticized for being too loose, leading to high inflation. Inflation has declined for 11 straight months, but it remains a concern for consumers (Source: "Economy / December 9, 2024").
2. Stock Market Stagnation: Under Bidenomics, the stock market has essentially moved sideways for two and a half years. The Dow Jones Industrial Average (DJIA) has only increased by about 10% since Biden took office, eliminating any residual wealth effect from the Trump years (Source: "Economy / December 9, 2024").
3. High Mortgage Rates: The Federal Reserve's interest rate increases, aimed at combating inflation, have led to high mortgage rates. With mortgage rates above 7.5%, homes are no longer affordable for millions of Americans, increasing economic malaise (Source: "Economy / December 9, 2024").
4. Consumer Confidence Decline: The decline in consumer confidence, as measured by the Conference Board's Consumer Confidence Index, is another factor contributing to the reverse wealth effect. Consumers express fears of an impending recession, further discouraging spending (Source: "Economy / December 9, 2024").



These factors have led to a reverse wealth effect, where consumers become more cautious, lower economic growth, and exacerbate public gloom. The Biden administration's policies, such as the American Rescue Plan and the Federal Reserve's interest rate hikes, have contributed to this situation.

As we approach the 2024 election, the future of Bidenomics remains uncertain. Investors and voters alike will need to weigh the impact of these policies on the U.S. economy and decide whether to continue or pivot from the policies that have shaped the past four years.

In conclusion, Bidenomics has seen a fizzle in the wealth effect, with high inflation, stagnant stock market, unaffordable housing, and declining consumer confidence contributing to a reverse wealth effect. As the 2024 election approaches, the future of Bidenomics and its impact on the U.S. economy will be a critical factor in voters' decisions.