- Monday, September 4, 2023

The U.S. economy is showing increasing signs that the federal government’s spending spree of the past two years is doing serious damage.

The massive, unnecessary federal spending increase, which has been debt-financed despite President Biden’s claims to the contrary, is an especially powerful stimulant to inflation. To fight that government-caused inflation, the Federal Reserve raised interest rates radically over the past year, suppressing investment and consumer spending.

As a result of this enormous government malfeasance, companies dealing in consumer products have been reporting bad news in recent weeks, consumer credit card debt has hit an all-time high, and housing sales continue to decline.

The signs of consumer retreat are clear. The discount retailer Dollar Tree’s shares “got whacked in the premarket trading hours in New York after second-quarter earnings slid from a year ago,” ZeroHedge reports. Dollar Tree’s net income for the quarter was down by 44% from the same period last year.

The company’s chief financial officer cited problems with “sales mix and elevated shrink.” The latter refers to the losses the company is suffering because state and local governments across the country encourage theft by not punishing the culprits.

Profits of the Kohl’s department store chain fell by 60% in the second quarter compared with the year before.

The Macy’s department store chain is likewise suffering big losses as consumers tighten their purse strings. “The department store swung to a $22 million loss from $275 million in net income a year ago,” Retail Dive reports.

Excessive credit card debt is hitting consumers and retailers hard. “In a fraught economic environment that has undermined discretionary spending all year, credit card delinquencies took a bite out of Macy’s results in the second quarter,” the Retail Dive story notes.

With federal student loan repayments resuming in October, consumers will be under added pressure, which is sure to reduce retail sales even further.

The fitness bike company Peloton’s stock value declined on expectations of continuing large revenue losses. “Peloton Interactive shares plunged 23% Wednesday to record lows after the company reported another decline in paying subscribers and said the costs of an equipment recall was denting its profit,” The Wall Street Journal reports. “The stock has declined roughly 50% in the past 12 months and more than 95% from its pandemic-fueled high in early 2021.”

Dick’s Sporting Goods failed to meet earnings expectations for the quarter, and the company’s stock price fell by almost one-quarter on the news.

Like Dollar Tree, Dick’s is suffering the effects of local governments’ soft-on-crime policies, with shoplifting and employee theft on the rise. The company’s chief financial officer said that organized retail crime has been significantly higher than expected, The Wall Street Journal reports.

Another sporting goods retailer, Foot Locker, fell short of expectations and suffered a big loss in stock value, citing “shrink” and the need for bigger discounts to lure customers.

“What’s important to note is that about half (47%) of the retailer’s customer base is in the lower income bracket and might serve as more evidence that the weakest households continue to pull back on spending,” ZeroHedge reports.

Meanwhile, “AT&T last month expanded a cost-cutting target by another $2 billion over the next three years,” The Wall Street Journal reports. “Earlier this year, Chief Executive John Stankey said consumers and businesses are tightening their belts, including by delaying phone upgrades.”

The firm’s competitors are struggling, too. “Verizon has also been retooling its pricing strategy as it seeks to reinvigorate growth in its struggling consumer-focused unit,” and T-Mobile “plans to lay off about 5,000 employees, or 7% of its workforce, as the cell carrier looks to reduce costs amid rising competition in the wireless industry,” the Journal reports.

With interest rates at a 22-year high, housing prices near record highs, and consumers mired in more than $1 trillion in credit card debt, lagging home sales in July extended “one of the deepest housing slumps in recent memory,” as The Wall Street Journal phrased it.

While retailers and other industries grapple with declines in consumer spending, President Biden is enjoying “a run of positive economic news” for which he and “Bidenomics” can take credit, The New York Times argues.

“As Mr. Biden gears up for his re-election campaign, perhaps what is most encouraging to him is that consumer confidence is rising to levels not seen since the early months of his tenure in the White House, before inflation surged,” the Times states.

Ignoring the fact that “inflation surged” because of Mr. Biden’s reckless spending, the article cites polls by the University of Michigan and the Conference Board that supposedly “suggest consumers have grown happier with the current state of the economy and more hopeful about the year ahead.”

The premise behind the massive debt the federal government is piling on your back is that government spending increases economic activity. That premise is wrong. You can believe The New York Times, or you can believe what is happening all around you. That’s your consumer choice.

• S.T. Karnick is a senior fellow and director of publications for The Heartland Institute, where he edits Heartland Daily News and writes the Life, Liberty, Property e-newsletter.

Copyright © 2024 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.

Click to Read More and View Comments

Click to Hide