President Biden campaigned on reducing wealth inequality (as well as income inequality). Hey, mission accomplished! The four-month stock market slide, the worst for the S&P 500 since 1939, has made a lot of wealthy people a lot less wealthy. Of course, it has made a lot of seniors and middle-income working families with IRAs and pensions a lot less wealthy, too. And that’s a huge problem for Biden and the Democrats.
Are Democrats worried that Apple CEO Tim Cook and many of Apple’s investors are too wealthy? They can stop worrying. Apple’s market capitalization has fallen about half-a-trillion dollars since the beginning of the year.
Are Jeff Bezos and investors in Amazon a little too rich? Good news! Amazon’s market capitalization has lost about $750 billion so far this year.
And you have to think the left is seething that Tesla CEO Elon Musk has enough money and clout to buy Twitter. Tesla and its investors are down too this year, but not that much, about $150 billion.
Had Sen. Elizabeth Warren (D-Mass.) been able to get her wealth tax passed and signed into law last year, wealthy taxpayers who were worth a whole lot more last Dec. 31 would be paying taxes on assets they no longer have. The fact that money has vanished is bad news for the left, but it’s a lot worse news for the U.S. economy. Because it is private sector wealth, not government spending, that drives investment and economic growth.
Of course, what the left really wanted to do was take that money from the rich and hand it out to favored groups, no doubt in the hope the recipients would vote Democrat in November.
As various news stories keep reporting, the left thinks it will get hammered in the coming midterm elections not because the Biden administration has done a terrible job of handling inflation, the pandemic, rising crime and the Afghanistan withdrawal, but because the government hasn’t spent enough money. And paid for that largesse by raising taxes on the rich.
In fairness, Biden doesn’t deserve all the credit—or is it blame?—for reducing wealth inequality. He had help. Democrats passed his American Rescue Plan (ARP), which ladled out nearly $2 trillion, exacerbating the already growing inflation. For example, the ARP passed in March of last year. Inflation that month was 2.6 percent, slightly above the Federal Reserve’s target rate of 2 percent. In March of this year, exactly one year later, inflation was 8.5 percent.
And Biden’s effort to reduce wealth inequality received a boost from the Federal Reserve, which has been extremely slow in scaling back efforts to increase the money supply. During the pandemic it bought nearly $5 trillion in mortgage-backed and government securities. And the M2 money supply is up to $21.6 trillion, up from $15.5 trillion two years ago, according to the Washington Post.
Recall that Nobel Prize-winning economist Milton Friedman once observed, “Inflation is always and everywhere a monetary phenomenon.”
Hoover Institution economist David Henderson expounds on what Friedman was saying, “Friedman argued that one could not find inflation anywhere in the world that was not caused by a prior increase in the supply of money or in the growth rate of the supply of money.”
The Federal Reserve undertook a massive increase in the money supply and is only starting to scale that back. Textbook Friedman.
Now, Biden and his administration are trying to convince voters they aren’t responsible, at least not completely, for the rapid rise in inflation, and the Federal Reserve’s subsequent decision to raise interest rates, which has sent the stock market reeling—especially the technology-heavy NASDAQ. Biden says Russian President Vladimir Putin is responsible for much if not most of the economic disruptions. And Putin’s war no doubt exacerbated the trends.
But maybe Biden’s taking the wrong approach. Biden campaigned on reducing wealth inequality, and he’s certainly done that. Wealthy people with money in the stock market are likely worth a lot less today than at the beginning of the year.
Maybe Biden should just own it. When the media ask what he’s doing about wealth inequality, Biden could just point to the stock market and exclaim, “Promises made, promises kept.”