Sunday, March 7, 2021


Joe Biden’s Continued use of “Consumer Spending” is the Right Economic Solution.

January 21, 2021 by  
Filed under Business, Health, Money, News, Opinion, Politics, Weekly Columns

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(ThyBlackMan.com) The means, by which our economy can reach its potential of creating consistently over 200,000 jobs monthly, has to directly involve the consumer! The reason, for making this statement is relatively simple. The consumer makes up approximately 70% of our GDP (gross domestic product), which means Consumer Spending is responsible for 70% of the jobs created in our economy. Joe Biden’s continued pragmatic, and fact-based approach to growing our economy will not fail, because it is data driven. Using factual information to rebuild the U.S. economy will make the Biden administration eminently successful.

The consumer, cannot be taken out of any equation that purports to be the answer to the solution of the effects of slow economic growth, caused by the COVID-19 Economic Downturn. How can you work around seventy percent of your GDP and say with a straight face, this is a realistic solution? What we know, because we have had over twelve years of experience, since the 2008 Great Recession, feverishly trying to make the policy of easy money or low interest rates work is, low interest rates alone are inefficient, when it comes to growing GDP. Therefore, a fiscal policy has to be adopted that is more efficient than low interest rates, if we want to grow the United States economy and create the millions of jobs needed to sustain long-term economic growth.

In support of a Demand Side (Consumer Spending) economy, Joe Biden and his economic advisers do not have to turn to historical statistics. Although historically, it is well-documented, Consumer Spending is responsible for making America the number one and largest economy in the world. We can just look at the initial stimulus package, which is loaded with verifiable data, in support of Consumer Spending, as an engine of job creation. Right now, Mr. Biden and the Democratic Party are correctly leading the nation with a Demand Side economy. This Demand Side economy is functioning well in real-time in reducing the highest unemployment rate, since the Great Depression!

Consumer Spending, as a result of the Cares Act (stimulus) Tax Cut, was a major contributor in the rate of unemployment dropping from 14.7% in May 2020 to 6.7% in November. As the economy reopened in May with 2.5 million jobs, strong Consumer Spending enhanced the recovery. The initial consumer stimulus (tax cut) amounted to an estimated $290 billion, and created demand for products, and services, which lasted 8 months, to November. However, Consumer Spending fell in November and December, which was a sign that the economic impact of the Cares Act Consumer Tax Cut was dwindling.

consumer spending JOE BIDEN 2021

Seeing that Consumer Spending was on the ropes and wanting to help their candidates win the Senate, through the Georgia elections, Republicans agreed to a REDUCED consumer (stimulus) tax cut in the Coronavirus “RELIEF” Bill. They reduced the tax cut to $600 from the $1200 that was in the Cares Act. Republican Senate Majority Leader McConnell sought to tie down the Biden administration with a slow growth economy through the reduced tax cut, going forward. However, Biden’s push for a bigger stimulus or consumer tax cut, of an additional $1400, bringing this round of consumer benefits to $2000, will help the economy and blunt Senator McConnell’s cynical plan.

Consumers started receiving the $600 stimulus checks on January 4, 2021. They started spending the $600 benefit immediately, stimulating economic growth and creating jobs, confirming consumption data which shows low- and middle-income Americans are more likely than wealthy earners to spend benefits, from the government right away and create millions of jobs. Because this is happening in real-time, the impact of Consumer Spending in this slow growth economy is obvious and discernible.

Even, as we see in a verifiable way, a Demand Side economy developing and performing, when it comes to job creation and lowering our high unemployment rates, Biden and the Democratic Party are a bit clumsy in their support. It is as if they do not realize, they are applying the right economic solution to our moribund economy. They are calling what really are “tax cuts” to consumers, stimulus checks, implying that the “Consumer Tax Cuts” are not a part of, and have no place in a grand plan to rebuild the economy, even as the tax cuts are actually “rebuilding our economy,” and reducing job losses, right before our eyes. They are implying, there is a quickly approaching expiration date, to what has proven to be a successful data driven, market-based economic strategy. It is as if they are saying, as soon as we get the economy back to what many call a pre-pandemic level, we will abandon Consumer Spending, that is, Demand Side tax cuts as the chief driver of this expansion, in favor of the failed policy of Supply Side economics or public spending and 3rd Party Programs.

Assisting the Biden administration’s “haste” in the abandonment of a Demand Side economy are its critics. The GOP believes ending or reducing monetary stimulus (consumer tax cuts) and any form of aid, will bolster the economy. They feel it will incentivize people to return to work. Additionally, there is a school of thought among economists, stimulus checks issued to approximately 160 million consumers under the initial Cares Act, and now the $600 to a similarly large group of consumers is, a shotgun type approach of capital distribution. They see this approach as being too expensive and inefficient. Needless to say, they do not see this model of capital infusion working in a normal economic environment. The germane question, in regard to the above views is, seeing that Consumer Spending is actually working in reducing our high unemployment rates, and creating jobs through Consumer Tax Cuts (stimulus checks), what federal economic booster plan, can replace Consumer Spending, that would effectively decrease our high jobless rates at the same rate?

In a speech titled, “Full Employment in the New Monetary Policy Framework,” Federal Reserve Governor, Lael Bernard, on January 13, 2021, said this about U.S. unemployment: “If we adjust the 6.7 percent headline unemployment rate, for the decline in participation, since February and the Bureau of Labor Statistics estimate of misclassification, the (December) unemployment rate would be 10 percent, similar to the peak following the Global Financial Crisis.” With the “real unemployment rate,” at 10%, that means, the black unemployment rate, which is usually 5-6 percent higher than the national unemployment rate is, really 16%.

Being aware the U.S. economy is in a deep hole, hemorrhaging jobs, 140,000 job cuts in December, and understanding the economic impact of the $600 stimulus check coupled, with the $1400 check will be short-term, dwindling just as the 2022 mid-term elections gear up, Mr. Biden and his economic team need to adopt a long-term Demand Side (Consumer Spending) Tax Cut strategy that will strengthen our already actively growing economic expansion; one that will answer the objections raised by critics in terms of efficiency, and be data driven and practical. Such a Consumer Tax Cut Plan must overcome the divisions created by the out-going president, of race and culture. It must also be seen by working-class Americans and businesses as delivering when it comes to creating millions of jobs.

Lost Demand, due to the virus can be restored, in the long-term, with a 10%, $25,000 Demand Side Tax Cut. Baby Boomers, as a homogeneous group, who are retiring at a rate of 10,000 a day, who will be the target of such a tax cut, are responsible for close to 40% of all Consumer Spending (consumption). Baby Boomers also, include rural whites, and an equitable number of minorities. A 10%, $25,000 Consumer Tax Cut (The Consumer Tax Cut Explained – Jobs and Their Creation (thefixthistime.com), “will drop $254 to $300 million “a day” or more into our economy” for businesses, both large and small to compete for, over the next 10 years, which would be the duration of the tax cut. This more strategic consumer stimulus (tax cut) plan will buttress the currently expanding U.S. economy and will bring back, by the millions, the jobs lost in the pandemic. The cost of the tax cut would be $1.5 trillion or less, which is comparable to the cost of the failed Trump Tax Cut Plan, which was legislated to last for the same period, 10 years.

The $1.5 trillion Trump Tax Cuts and Jobs Act of 2017 failed to grow our economy “prior to the pandemic,” as GDP declined to 2.3 percent in 2019, compared with 2.9 percent GDP in 2018. The Federal Reserve as a result, projected GDP of 2.00 percent for 2020. Of course, the pandemic struck, obscuring the Republican Party’s economic failure, as the Trump Tax Cut Plan was passed on a party line vote, with no Democratic Party support.

We have to ask ourselves, why are we continuing to suffer under these horrendous rates of unemployment? If Mr. Biden and his economic advisers make the right choice, this Economic Downturn could be ended. Divisions within our nation, when it comes to rural whites could be healed to a great extent, as the Consumer Tax Cut would certainly challenge Mr. Trump’s political hold on that group, as their economic circumstances change for the better. A near 0% interest rate economy is an aberration that cannot be sustained over the long-term.

If the Biden administration deploys our wealth and resources wisely, in the age of COVID-19, we can rapidly grow our economy. Retirees, and pension funds are under tremendous stress and need relief from twelve years of abnormally low interest rates. A 10%, $25,000 Consumer Tax Cut (stimulus) will give the Federal Reserve room to normalize interest rates, as our economy grows. President Biden through a process called “budget reconciliation,” can put the 10%, $25,000 Consumer Tax Cut Plan on the floor of Congress. It can be passed with a simple majority vote, with Vice President Kamala Harris casting the deciding vote in the Senate, if necessary, for its passage.

Staff Writer; James Davis

Mr. Davis is a leading expert and consultant in Financial Analysis and Social Dynamics. He is a graduate of Florida A. and M. University (FAMU), a former stockbroker, and a human rights activist who resides in Sanford, Florida. He was awarded the prestigious Governor Haydon Burns Scholarship to attend FAMU and while at FAMU was awarded the first Martin Luther King Scholarship. He is the author of three books, among them is “The Fix This Time,” Boost Your Retirement Income! Simultaneously Create Jobs and Spur Economic Growth (https://www.amazon.com/dp/B00MI3PD2M).

Mr. Davis can be reached through his blog @ https://thefixthistime.com.


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