US Household Wealth Hits All-Time High at $154.3 Trillion: Is It Really a Cause for Celebration?
A recent report by CNN’s Matt Egan reveals that US household wealth has reached a staggering record of $154.3 trillion. While this might seem like a reason to celebrate, it’s essential to delve deeper into the factors driving this growth and how it affects the average American.
The Illusion of Wealth:
It is important to note that this record wealth is largely the result of asset-price inflation, rather than robust economic growth. In reality, the US economy has only grown by an average of 1.33% per year over the past year and a half. This means that the increase in wealth on paper does not necessarily translate to tangible improvements in the lives of ordinary Americans.
Let’s consider an analogy: If you have a freezer full of hamburger meat, it was valued at $4 per pound when President Biden took office and is now valued at $5 per pound. While this might seem like a 25% gain, you don’t actually feel any richer because you still have the same amount of hamburger meat. The only difference is that it would cost more to replace it.
Impact of Inflation:
The persistent inflation facing the US economy has significant consequences for Americans. Real incomes, adjusted for inflation, have taken a hit, with after-tax household income falling by 8.8% last year — the sharpest decline in over a decade. Additionally, credit card debt has reached a record $1 trillion, further diminishing the financial well-being of many individuals.
While the wealthy may enjoy the gains from inflated asset prices, it is the low-income individuals who feel the impact of rising inflation the most. These individuals are more likely to be renters, unable to take advantage of the current mortgage rates, and are forced to spend a significant portion of their income on essential items such as food and gasoline, which are particularly vulnerable to price increases.
The Domino Effect:
Inflation does not exist in isolation; it has a cascading effect that ripples through various sectors of the economy. Rising prices for diesel and commercial warehouse rents, for example, contribute to the overall increase in grocery prices. Consequently, everyday consumers, especially those in metropolitan areas who rely on delivery services, such as ordering from Amazon, still bear the brunt of high fuel prices.
Blaming the Wrong Party:
It is a peculiar habit of Americans to credit or blame the president for economic circumstances that are often beyond their control. The reality is that economic conditions are influenced by a multitude of factors, and the president’s power over the economy is not as significant as they claim.
For instance, during the Clinton administration, the economy performed well, largely due to policies initiated by previous administrations and the transformative power of personal computers and the Internet. These advancements were not within President Clinton’s direct control.
The Role of Government Spending:
Both the Biden and Trump administrations have contributed to the current state of the economy through excessive spending. Increased federal spending, particularly in response to the COVID-19 pandemic, has fueled inflationary pressures. In 2022, federal spending amounted to 25% of GDP, the highest level since the end of World War II.
It is crucial for President Biden to recognize the impact of his advocacy for continued high levels of spending on the persistent inflation experienced by Americans. Taking too much credit for an economy burdened by inflation may not be in his best interest.
In Conclusion:
While the headline figure of record household wealth may seem impressive, the reality is far more complex. Asset-price inflation and persistent inflationary pressures have created a situation where nominal wealth does not necessarily equate to increased well-being for ordinary Americans. By understanding these underlying factors, we can have a more accurate assessment of the current state of the US economy.
Kevin D. Williamson is a national correspondent for The Dispatch and a writer in residence at the Competitive Enterprise Institute.
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