The Free Money Has Run Out And It Shows In The Polls

Authored by Mike Shedlock via MishTalk.com,

The third and largest round of fiscal stimulus was in March of 2021. That’s when Biden’s popularity peaked at 55.1 percent.

Base image from 588 Biden Approval Ratings.

Why Biden’s Approval Rating Is Miserable

Income is rising and so are wages. Even real income is up. But real wages are another matter.

Personal income data from the BEA, hourly wages from the BLS, real hourly earnings and chart by Mish.

Personal Income vs Hourly Wages Notes

DPI means Disposable Personal Income. Disposable means after taxes.

Real DPI means inflation adjusted using the Personal Consumption Expenditures (PCE) deflator. Real DPI is a BEA calculation.

Average hourly earning are for production and nonsupervisory workers.

Real wages are deflated by the Consumer Price Index (CPI) not the PCE.

The BLS does not report a real hourly wage. I used the CPI-W index for production and nonsupervisory workers, produced by the BLS, as the deflator.

Personal Income Definition

The BEA defines personal income as “Income that people get from wages and salaries, Social Security and other government benefits, dividends and interest, business ownership, and other sources.” 

Rental income is a part of other sources.

Three Rounds of Fiscal Stimulus

Round 1, March 2020: $1,200 per income tax filer, $500 per child(CARES Act) – Trump

Round 2, December 2020: $600 per income tax filer, $600 per child (Consolidated Appropriations Act, 2021) – Trump

Round 3, March 2021: $1,400 per income tax filer, $1,400 per child (American Rescue Plan Act) – Biden

The three rounds of free money fiscal stimulus (literally a helicopter drop), plus eviction moratoriums put an unprecedented amount of money in people’s hands. In addition, unemployment insurance paid people more to not work than they received working.

The third round of stimulus under Biden was totally unwarranted. However, it is also worth noting that Trump wanted a much bigger second stimulus package than the Republican Congress gave him. Trump is no fiscal hero.

For more discussion, please see Why Biden’s Approval Rating Is Miserable in One Economic Chart

The three stimulus packages, on top of supply chain disruptions, energy disruptions due to the war in Ukraine, and Bidenomics in general, set in motion the biggest wave of inflation in over 30 years.

Biden went from an approval rating of 17.2 percent to a disapproval rating of 17.2 percent.

Peak Free Money

In addition to declining real wages, perhaps Biden’s big problem is the free money has run out.

Biden’s popularity peaked in March of 2021 along with stimulus. Was that a honeymoon impact or peak free money?

[ZH: While not a perfect indicator, the lagged US credit impulse perhaps provides a proxy for US fiscal excess and when overlaid with Biden’s approval rating, it is clear that 2022’s re-acceleration did nothing for people’s faith in him… and it’s only got worse…]

I suspect a bit of each coupled with hope of more free money, especially student loan forgiveness.

Sending free money to Israel and Ukraine does not help perceptions of how Biden is doing. And neither does the border or ridiculous energy regulations that cost people money.

Biden keeps telling people what a great job he has done.

I don’t believe it and most don’t either. And that shows up in the polls no matter what reason you assign.