Americans are putting more on credit cards and are discouraged: Michael Faulkender

So once again core PCE inflation rose 2.8 percent annually in February as expected But that index excludes food and energy and oil and gas prices are up significantly over the past month Also personal income missed expectations So is this why Americans take such a dim view of the economy joining me now is Michael Falkender former assistant Treasury secretary for economic policy chief economist at the American first Policy Institute and Economics professor at the University of Maryland you got your whole resume in there Michael good to see you my friend So look at the polls that we can put some polls up about how Americans feel about the economy, and it's not good They don't like by dynamics. They think it has failed are they right? They are right David because if you look at how far American households budgets are going these days compared to what it was like just four years ago They're seeing that they're working harder than ever and yet They're not getting anywhere near where they were getting before and that's because while we've seen inflation come down It's not as if prices have gone down the price level is still rather elevated compared to where it was just four years ago Such that prices are about 18 percent higher than they were and what's so disturbing about the most recent report that came out today Is that for yet another month? Personal income went up less than inflation Yeah and so once you inflation adjust Households are further falling behind and that means they're putting more on credit and they're deeping Digging deeper into their savings accounts, and that's why they're discouraged David, and there's they're seeing that they're not getting ahead There's that old Obama index. I just probably the only time I've credited of an Obama index But he came out with one saying look People vote based on how much it costs to fill up their gas tank and and it's costing more I mean you look at the prices a month ago I think we're up about 40 cents in the in the past month and a half now. Well, there we go It's it's not up that much compared with a month ago, but still, you know 330 compared to 350 is significant for them That's right, David and a lot of that is coming from the fact that while oil and gas production is finally back up Refining capacity is not so there hasn't been any net increase in the ability of u.s Refineries to turn oil into the gas that we all put into our cars And that's of course because as you saw with the bite administration today, they came out with a rule That's not going to make it more expensive to ship things over Using trucks because they want everything to move to electric vehicles And so when you have policies that are moving you away from internal combustion engine Transportation to electric vehicles There's no reason for oil and gas companies to increase refining capacity And of course that's going to drive up gas prices. They're trying to kill gas-powered cars by regulation, right? Isn't it that simple? It really is that simple whether it's the what we call cafe Requirements the corporate average fuel efficiency or its tailpipe emissions policy that just came out or the one that came out today about trucking All of this is forcing Americans into cars They don't want which is away from reliable internal combustion engine cars that they've been using for decades Towards electric vehicles that may not be able to be charged that see batteries run out especially in cold weather and that aren't going to give them the amount of miles that they can drive per fuel up as they can get in there and by the way the cost of fortune if You're trying to fix them up and that's why insurance rates are up right now Let's talk about inflation generally though because you look at the price of gold which is going sky-high and Bitcoin Which is also kind of a play against the dollar there do seem to be some worrying signs about core inflation as the Fed would Call it. That's right, David so if you look at both of them, they're at all-time highs and usually we think about that as concerns about underlying inflation right because if you've got Concerns that that the money supply is going to keep increasing because again another big part of the Biden Administration's approach is to run massive budget deficits. Well, how much is that going to have to be monetized by the Fed? What is the pressure going to be on the money supply? And does that create underlying inflation that people are hedging through things like gold and Michael? of course the Biden's the Biden administration continues to blame the Explosive deficits their phrase on the tax cuts But the income from tax revenue has increased forty eight percent since the tax cuts kicked in So you just can't you just can't make that up. It doesn't it doesn't work tax revenue has increased about 50% Now so what's causing the the explosive deficits is clearly spending That's right, David If you look at fiscal year 2022, so the Tax Cuts and Jobs Act was fully in place We had returned from the pandemic We saw the second highest level of revenues to the federal government as a percentage of national output since World War two So it's completely false to say that the tax environment of the Tax Cuts and Jobs Act is not going to bring in enough revenue If indeed, it's the second highest since World War two The problem that we've got is massive growth in government spending you look at the fact that we're at 23 24 percent of national output in spending Michael Fogarty are always a pleasure to talk to you my friend. Thank