Put your ear to the American border and you might catch the sound of an economy surging. “Hear the mighty engines roar,” to borrow Gordon Lightfoot’s lyrics. “Silver bird on high.”
Isn’t it the case that Americans can usually rely on economic muscle and entrepreneurial dynamism to make their way and save the day? They’re doing it again.
“Falling inflation, rising growth give U.S. the world’s best recovery,” boasted a headline in The Washington Post this week. It’s no exaggeration. And what a striking departure from the pervasive America-is-failing storyline it is.
The economy of big rival China is troubled by comparison. G7 competitors are far behind on a wide range of economic indices. Canada’s economy grew by 0.2 per cent in November. America’s GDP grew by 3.3 per cent.
Bidenomics has been well and widely mocked by Republicans. But the Cassandras who repeatedly predicted a recession can eat their words. Swallow them whole.
Forecasters said U.S. growth would be below 1 per cent last year. It turned out to be 3.1 per cent. Inflation is almost at the Federal Reserve’s guideline of 2 per cent, down to 2.6 per cent. Unemployment is low, consumer confidence is at a two-year high, and there’s a record stock market. Wage growth, as Treasury Secretary Janet Yellen put it, “is unique to our country’s recovery.” After inflation, it’s far ahead of others at 2.8 per cent.
With the country’s southern border awash with unstoppable waves of immigration, with its democracy under siege from Trumpism, and with its global stature threatened, the economic resurgence provides heartening relief.
For President Joe Biden’s Democrats, it is great news in an election year. For other jurisdictions like Canada, it’s important. In Washington, protectionist pressures have built up in both parties. If, as expected, the economic climb continues, such pressures will abate.
Mr. Biden is getting very little credit for the positive tidings. Just as countless millions continue to believe Donald Trump’s balderdash about the 2020 election being stolen from him, they believe him when he talks of economic carnage. He’s not the only one doing it. How about Nikki Haley, his lone remaining competitor for the Republican nomination? “We’ve got an economy in shambles and inflation that’s run out of control,” she claimed a few days ago. What was she smoking?
Perceived economic strength is one of the main selling points of Mr. Trump, who could well have won the 2020 election had not the coronavirus pandemic hit that same year. He can ill afford Bidenomics to undercut his advantage.
The American recovery has been spurred in large part by putting money in the pockets of the people via gigantic government spending. It’s a return of sorts to the Keynesian stimulus model.
Other countries saw their governments dispensing large sums, but hardly to the tune of Washington, which poured out US$3-trillion in 2020. The stimulus, according to the International Monetary Fund, was 25.5 per cent of the gross national product. Others in the G7 were below 20 per cent – an exception being Canada, where the level was 21 per cent of GDP in 2022.
Mr. Biden was vice-president to Barack Obama in the wake of the 2008 global financial meltdown. It has become conventional wisdom since that time that the Obama administration, handicapped in facing a Republican Congress, did not provide nearly enough stimulus spending, thus delaying the recovery. Mr. Biden has learned from that mistake.
While all the spending looks good now, it came with a lot of pain. Economic analysts rate it as a significant contributor to the rise in inflation, which in 2022 reached its highest level in 40 years. The national debt burden is now staggering – close to twice as much as a percentage of GDP as Canada’s. But it is not a hot-button issue in the U.S.
The American turnaround comes at a time when the Chinese economy appears to be stumbling. It’s a boost for American pride given there’s been so much talk of China supplanting the U.S. as the world’s dominant economic power.
Other countries, Canada certainly included, could only wish they had the extraordinary enterprising spirit shown by Americans. In response to the tremendous job losses from the pandemic, new businesses in the U.S. were started at a fantastic pace that has continued to the present day, thus stoking the recovery.
In recent times we’ve called into question so many features of the American way. No need to question the one – economic exceptionalism – that gives them their foremost competitive advantage.
Lawrence Martin