…And other tales of the weird White House bubble-mind that's guiding this election, and the Biden administration.

So… This weekend, you may have noticed that for the Easter holiday, the Biden administration declared A Proclamation on Transgender Day of Visibility. I underscore this not in order to trigger everyone who believes Easter is a holy day for Christians who are not thinking about transgender visibility, but to highlight the fact that the denizens of the White House appear to be detached from the reality that most Americans live.

So set aside Easter and trans visibility for a moment, hold the thought that people in the White House don't live in the America that we inhabit, and think about… eggs. Not Easter eggs (no religion, please, we're Democrats), but actual cooking eggs you buy by the dozen at the supermarket. If you can afford it. We asked Gary Cohn, the Vice Chairman of IBM, former White House Chief Economic Advisor and the 11th director of the National Economic Council, and ex-president and chief operating officer of Goldman Sachs to talk about Bidenomics on the podcast.

Here's more on the question of what a dozen eggs cost:

So the price of eggs has gone from somewhere like a dollar and a half a dozen to at one point we were close to $6 a dozen in the United States. Now look, it's pure inflation. There were some extraneous factors, which because we had avian flu, we had to kill off some of the chickens. But it doesn't matter to the US consumer how the price got there. All they know is they buy three dozen eggs every Monday and it keeps them through the week, and that $2 now became $6. So they were buying three dozen eggs for $6, now they're spending $18. So all of a sudden they have 12 less dollars to spend on something else. So if you are a hardworking American, you are now making a decision, what am I not going to buy because I'm going to buy the three dozen eggs because my family needs three dozen eggs.

Why do Americans think the economy stinks? Because, for them, the economy stinks. They can't afford a mortgage. They can't afford gas. They can't afford milk. And they can't afford eggs. And while the minimum wage may be going up in certain elite zip codes, all that means for most Americans is more dollars chasing fewer goods.

It's a little weird that the White House residents who shop at the same supermarkets where your podcast cohosts shop haven't noticed that things are… expensive. Haven't noticed that, actually, it's hard to afford the things that people could manage five years ago. It's as if they don't live in the same world.

Another thing Americans are noticing is how much money they owe, and how they can't pay off their debts. Never before in history have Americans owed so much: Total household debt increased by $212 billion in the fourth quarter of last year, mortgage balances were up by $112 billion from the previous quarter and stood at $12.25 trillion. Indeed, they went from record rates of savings to record rates of debt in few short years. Why? Because the government poured unspeakable sums into the economy during Covid. Too much stimulus, too much government engineering, too few goods, and… inflation. It's not rocket science.

How does this get fixed? By rectifying the underlying problems. Getting people back to work. Lowering prices by lowering tariffs. Ending government handouts – like student loan write offs – and ending a cycle of lying to the American people. Your wages can't keep going up, and interest rates can't keep going down, because that's not how you cool off an economy.

For as long as the president of the United States pretends to the American people that there are gimmicks that will make life better – no more junk fees! – we will lack the leadership necessary to return the economy to an even keel.

HIGHLIGHTS

Why do Americans think the economy is so terrible?

GC: When you talk about the economy, the number one thing that affects most people and their well-being is how well their standard of living is. And people measure their standard of living by how much purchasing power they have. They take their wages and at the end of the week, what do their wages buy? And it's a basic school, do my wages buy more this week or they buy less? And the two most important factors that people look at when they're looking at the purchasing power of their wages is food and energy. And so when you look at what's going on with the price of food, and that's very transparent because people buy relatively the same basket of groceries week after week, people have a pretty good idea, "Hey, my basket of groceries cost me $100 three years ago. That same basket cost me $125 plus today."

And by the way, that's the actual data. So the basket of groceries that cost you $100 three years ago cost you over $125 today. So you're saying, look, I'm paying $25 plus more for my basket of groceries. My wages surely haven't gone up by that same percentage in that period of time. So even though I'm working just as hard as I was three years ago, I cannot purchase as much as I could three years ago. And that's a basic problem that the Democrats have in explaining that, yes, the economy is doing fine. Last month we got to a point where inflation and wages were actually identical, so people stopped losing purchasing power.

Biden is claiming the economy is getting better under his stewardship. Why is he so disconnected from voters?

GC: This is why there's such a big disconnect between the Biden White House and the US economy and the voters, and why the vast majority of voters polled today tell you the economy is still one of their top issues, and they're very disappointed by the US economy. US consumers are pretty smart. They're very smart. They know what they spend each week for their groceries. They know when they stand outside their car and they hold the nozzle down and they fill up their tank of gas. They know what those numbers were last week, last month, and last year. So they know if that tank of gas was $78 last week and it's $80 this week, they know there's $2 difference and they know that it was $60 last year. We remember those things. And then there's some real staples that have really gone through some price shocks that people have really had to deal with, like eggs, for example.

When we look at the price of eggs, people really watch it. So the price of eggs has gone from somewhere like a dollar and a half a dozen to at one point we were close to $6 a dozen in the United States. Now look, it's pure inflation. There were some extraneous factors, which because we had avian flu, we had to kill off some of the chickens. But it doesn't matter to the US consumer how the price got there. All they know is they buy three dozen eggs every Monday and it keeps them through the week, and that $2 now became $6. So they were buying three dozen eggs for $6, now they're spending $18. So all of a sudden they have 12 less dollars to spend on something else. So if you are a hardworking American, you are now making a decision, what am I not going to buy because I'm going to buy the three dozen eggs because my family needs three dozen eggs.

How damaging was Biden's COVID stimulus package?

GC: Plain and simply, it was a catastrophic mistake. The $1.9 trillion stimulus at the beginning of the Biden administration when we were already coming out of COVID, when the economy was renormalizing, when the consumer was already in relatively to very good shape because they had taken their prior stimulus and they had used it to pay down debt. They had used it to build savings back, and we actually had a consumer in very good position. We did not need that extra $1.9 trillion stimulus package. And then, look, it didn't stop there. Had it stopped there, it might've been okay, but this idea that we're going to give consumers a lot of money and we're going to help stimulate the economy and we're going to increase the money supply, we didn't stop there. Then we went to the Inflation Reduction Act or the Inflation Creation Act.

So we then took trillions of dollars and then are putting that in the economy by creating infrastructure and building projects and stimulating more economic growth. Then we had the Chips Act, which look, I am supportive of the Chips Act, but we can't deny that it's not simulative to the US economy. The Biden administration continues to find ways to put money back into consumer's pockets, cancellation of student debt. All of these things have the exact same effect. They have more dollars chasing a finite amount of goods, and they put the consumer potentially in a better place to spend money. Even though they're spending money in an inflationary cycle, they're still creating more demand for goods.

Why are Americans in so much debt today after building up savings during COVID?

GC: Coming out of COVID, we were in the complete opposite side of this equation. We had created record high savings rates in the United States and we had consumer debt at basically record lows because people had taken the stimulus checks that the government had given them, and they had used it to pay down deficit, and they'd used it to save. Because, as you just rightfully pointed out, when you're locked in your house, A, the vast majority of expenses you have, whether it be commuting expense, car expenses, dry cleaning expenses, going out to lunch, buying lunch at work, all of those expenses that you have in your normal everyday activity of going to work disappeared, and the shopping that you would normally do, the only thing that was available was the grocery store or something that FedEx, UPS, or United States Postal Service would bring to your front door.

So your ability to consume was highly curtailed, so people were forced to save. Then when COVID ended, you rightfully pointed out, when we allowed people to go out and reengage in the economy, there was this massive pent-up demand for people to go out and spend money. And the American consumer in 4G has been taught that you should live on credit. If you earn a dollar, go spend two. And that's unfortunately what's happened. So we went from really low consumer debt levels to we are right back to all-time record high consumer debt levels.

So the consumer in this economy is feeling pinched because they have taken their credit cards, they've used their outstanding balances, their existing balances, they don't have a lot more room, they probably have no room left on their credit cards, their savings have been dwindled down, and interest rates are higher. So to the extent that they have anything that is being paid on a variable interest rate, which is most likely everyone does because, if your consumers are carrying a balance, that balance is affected by the interest rate, and so your interest payments alone on your credit card balances go up month, after month, after month, so your purchasing power goes up, you can't even afford the interest, so your debt goes up and up.

And add the last piece of this equation, because you talked about mortgages, for those Americans that were smart enough or were trying to really plan for their future, and they were trying to save money to put a down payment on a house, and they were looking what houses cost two years ago or three years ago, and they were looking at what interest rates were, and they thought that they would be in a position by 2024 to be able to buy a house, that possibility has completely disappeared because housing prices have gone up in this inflationary cycle, but even more importantly than housing prices gone up, the cost of their mortgage has doubled. So their ability to service a mortgage doesn't exist today.

So not only are people having a tough period right now in this existing environment where things are expensive, their ability to make a long-term investment in themselves and get a hedge against the economy by buying a piece of real estate is almost impossible right now with these very high mortgage rates, and I think it's going to stay very tough for the considerable future.

Why are young people racking up so much credit card debt?

GC: We've had credit cards for as long as I've been alive. The credit card industry had gotten smarter. It is now prospecting college-aged kids, so they're on college campuses. So they're going after a younger and younger demographic, but as you pointed out, Dany, very astutely, is the new digital buy now, pay later companies have attacked all the online shopping. So the online shopping, which is a different demographic, which is a much younger skewed demographic, it probably skews younger and more female, that's a guess, but I'm going to guess it skews younger and female, they're now trying to get that demographic to extend credit to them because, to them, it's a very profitable business to be the first in line to extend credit to somebody.

So this is an old true profession in the United States to get people hooked on credit. Once you own their credit profile, you're in control. And unfortunately, it's a never-ending phenomena that, once someone owes you money, you're just treading water or you're just climbing uphill all the time, trying to service the debt because the interest itself just eats away at you. And so every time you get a little bit of it paid, they give you a little bit more purchase of power, you build a little bit better credit record, they give you a little bit more purchasing power. You just keep treading water.

How would you advise the Biden administration to tackle this economic mess?

GC: I would say, "Look, we feel your pain. We understand that we've been through a highly inflationary cycle here. We are going to do everything we can," but then they'd have to do everything they could, "We're going to do everything we can to lower the burden on you as hardworking Americans. We're going to help you with the price of things. And therefore, we, as the government, are going to find ways to make things cheaper."

Now, look, that means, in many respects, they've done some of these quietly, they've done some of these things quietly, and the one thing is they have tried to make sure that the price of oil has not gone up too much because the worst inflation in the world, and we alluded to it a few minutes ago, is you standing out there holding the pump because you know that number every day you fill your car, you know exactly what it should cost. So when that number goes up by $5 a week or $5 a month, that's totally horrible for the administration.

So they've done everything they can. They've released all the strategic fuel barrels, they've done everything they can in the oil market to try and keep the oil price down. So they need to continue to flood the market with energy, basically, all energy, because it's not just gasoline, it's electricity. The price of electricity is going up, which is contrary to what they want to do. They want to determine what molecules of energy you can consume based on their pollutive powers, or their lack of pollutive powers. In this inflationary cycle, you have to put everything on the table. You have to say, "Look, we're going to let you consume gas, we're going to let you consume oil, we're going to let you consume coal. We're going to have nuclear power plants run full out because we just need to flood the market and make energy cheap, because energy is at the basis of everything we do."

Then they've kept up with this high tariff policy. I have a view, and not everyone agrees with me, but what is a tariff? A tariff is a consumption tax. A tariff at the border is a consumption tax. So if we're importing something in the United States, the tariff's paid at the border, that tariff is passed directly on to the US consumer in the form of a consumption tax or a price. Now, look, I'm pretty clear on this. If we manufacture something in the United States and someone's dumping that product here because they have a much cheaper cost of labor, because they don't pay a living wage, and they don't have a cost of capital, and they don't have to worry about the environment, we should not allow them to undersell our US manufacturers, but if we don't manufacture it in the United States, which is the vast majority of things that we import in the United States and our consumers really want to consume it, I don't know why we're putting a 20 or 30% tariff on at the border, which makes it 20 or 30% more expensive. If I were the Biden administration, I would say, you know what? We're going to suspend all tariffs on things that we don't make at the border right now, and that would lower the price of goods, especially the goods that we consume every day. We have no idea how many goods come in over the border every day that we don't make here. It's the vast majority of things that people buy at big box retail stores today, and they're not just cheap items, they are some of the most expensive items. From television sets, baby strollers, all the way down sort of the spectrum.

Is America's immigration crisis affecting inflation?

GC: The whole immigration problem in the United States is also creating more demands for goods and services, and that's part of the definition of inflation. It's too many dollars or too many people chasing a finite amount of goods or a finite amount of services. So if you look at New York City today, in New York City today, the vast majority of low end hotel rooms have been taken over by the city to house migrants. So if you're trying to travel to New York City and find a relatively cheap hotel room, they don't exist, because the migrant population is living in those hotel rooms because the city has taken them over.

And by the way, not only has the city taken them over, the city is feeding the migrant population, and so there's more demand for food, there's more demand for services, there's more demand for goods in the illegal migrant population, which has its own inflationary pressures here in the United States. So if we would curtail the illegal immigration and we would actually lower the price of goods by making them more readily available and not taxing things at the border for some period of time, I think that if I were trying to solve this problem, those are things that I would do, which would have pretty immediate effects.

What do four more years of Bidenomics mean?

GC: I don't think the next four is going to be any different. I think that's the definition of insanity, doing something different, doing something and expecting different results. So I think that this social spending will be there, the competition will be there. And by the way, instead of going through that list, the great irony of it is, everything on that list, except for raising taxes, is highly inflationary. That's the funny thing about it. Everything on that list is highly, highly inflationary. This anti-business, this anti-corporation, going after companies for no reason whatsoever, outsourcing our regulation to Europe and making Europe a pine on mergers that they know will go through and they can't stop them. This is a crime in itself.

The social programs, to me, it's socialism, it's redistribution of income. What they want to do is they want to redistribute income. And I think a lot of this revolves around this fallacy of taxation in the United States, and I'd love to spend a minute talking about it because I think people don't understand this. There's this trope that the rich don't pay, the rich need to pay their fair share, billionaires don't pay taxes in the United States. It's just not true. So the data is the bottom 50% of taxpayers in the United States pay 2.3% of all taxes collected. In effect, the bottom 25% have a negative tax rate. They don't pay taxes. They get money back from the federal government. So where the top 1% of all earners pay 42.3% of all taxes collected, top 5% pay 62.7, and the top 10% pay 73.7%. So top 10 pays basically three quarters of all the tax dollars that are collected in the United States.

Does the United States have a wealth tax?

GC: We don't have a wealth tax in the United States, although they'd like to have a wealth tax, we don't have a wealth tax right now. And outside of tax-free municipal bonds, there's no income in the United States, I don't care who you are or where you live that doesn't have a tax rate of 20%. If it's qualified dividends, if it's long-term capital gains, any of those things that billionaires have, they're paying at least 20% on that income. So this idea that the billionaires are paying single digit tax rates, I'd like to know how they're doing that because it's not possible.

This is Warren Buffett's argument, that he pays less in taxes as a percentage than his secretary. Should he be paying a higher tax rate?

GC: Warren Buffett, if you want to pay more taxes, pay yourself a salary. Warren Buffett takes zero salary. Warren Buffett only owns stock in Berkshire Hathaway. Warren Buffett gets dividend income only probably in the billions of dollars. So he pays a 20% rate on his dividends and he probably pays his secretary very well, so she probably pays a 34% rate on ordinary earned income. So Warren Buffett, you could fix this, why don't you pay yourself a billion dollar a year salary?

It seems America is putting a foot on the gas of inflation and a foot on the brake by raising interest rates. Are we in an economic donut?

GC: You put your foot on the brake and the gas simultaneously. So it's the exact same thing. You're going in high-speed circles, and making lots of smoke, and burning out your tires.

That's exactly what we're doing, is the Fed can control interest rates, and they can try and slow down economic growth. They can try and create more unemployment, which is what they're trying to do by slowing down economic growth. But if the federal government is going to out-stimulate the negative consequences of higher interest rates, we're spinning around in circles and creating smoke.

Some claim that inflation is devastating because wages aren't keeping up. How do we solve the wage conundrum?

GC: You're not going to solve the wage conundrum. When you're running sort of six-plus percent annualized inflation, companies can't afford to raise wages 6%. And by the way, here's the conundrum. As you raise the wages, they have to transfer through the economy into the cost of goods sold.

So one of the issues going on, and one of the reasons I think that inflation has been stickier in the first half of this year, is 22 states on January 1st of this year raised their minimum wage, which I don't think people were thinking about. But when you raise your minimum wage in 22 states, and some states like California raised it a lot, so all of a sudden, the prices at fast food restaurants have to go up dramatically to cover the cost of those wage increases, is highly inflationary. So this wage price inflation has to go through the economy. As companies raise wages, they have to raise the price of their goods or services.

So if we're going to get inflation to come down, you can't expect wages to go up and the prices of goods to go down. That can't happen.

What will Biden's attack on "junk fees" do to the economy?

GC: Okay, you took $20 billion of junk fees out. Do you think the financial service industry is going to just say, "Okay. We can live without those $20 billion of fees. They were just extra. We didn't really need to make those"? It's not the way it works.

These are companies that, in good times, do well, in bad times, they sometimes don't survive. In fact, we've seen banks have to be bailed out last week and the week before, and a year ago, we went through Silicon Valley and Signature Bank. These are industries where you're only as good as your last credit decision, and the regulators are always telling you to build more capital. So if you're going to take $20 billion of revenue out of these banks, you're going to have to find somewhere else to make that revenue up.

And so the easiest place to make that revenue up if you're a financial institution is to cut down on credit losses. How do you cut down on credit losses? You pull back credit lending from the higher-risk credits, which is the lower-end borrower, which is the hardest-working individual you probably have in your credit stack.

So that, again, slows down the economy, it provides less credit to hardworking men and women, but it makes the bank safer and sounder, and it will protect those losses. So instead of getting the money through junk fees and extending credit, they'll stop getting the junk fees and they won't lose the money in credit, and it's really detrimental to the economy.

Full transcript here.