Polls show economic concerns were dominant for many Americans this election season. Unfortunately, voters couldn’t always count on getting accurate reporting about these issues.
Consider a Washington Post article titled “7 ways a recession could be good for you financially.” A closer look at these seven claims reveals just how wrong—or at least highly misleading—financial reporting can be:
1. “Housing prices may finally come down to reasonable levels.”
This is a verbal sleight of hand. Just because home prices go down does not mean homes are more affordable. Monthly payments for mortgages are increasing even as home prices fall because interest rates are rising so fast. People who have seen their incomes eroded by inflation are also finding homes unaffordable, even at reduced prices. Home affordability has fallen 33 percent since January 2021.
For existing homeowners, they now have the threat of being underwater on their mortgages if their home values decline below their outstanding loan balance. Where is the silver lining?
2. “Savings rates are up.”
Savings rates are not up, as the article claims; they have totally collapsed. Monthly savings from January 2021 to today have plummeted 16.9 percentage points, which is an 85% decline. Claiming savings rates are up is not deceptive but demonstrably false.
3. “I bonds inflation rate might go even higher.”
I bonds are government securities, which pay an interest rate that is partly dependent on inflation. They do not automatically pay more in a recession. When the rate on an I bond goes higher, it is not a good sign, but a terrible one – it means inflation is getting even worse. While an investor receives a return slightly better than inflation on this particular investment, that is little consolation for all the other losses imposed by inflation. I bonds are merely a minor hedge against inflation, not a path to wealth.
4. “The dollar is king.”
The strength of the dollar relative to other currencies does little to help the vast majority of Americans who cannot afford to travel overseas as the article advises you to do. Most Americans have been so crushed by inflation that gallivanting around the world is not exactly within their budget. If your dollars cannot get you by at home, what good is it that the dollar goes further abroad?
5. “Unemployment is still relatively low.”
Unemployment is relatively low now, but it will soon get worse as businesses continue layoffs and stop hiring. Virtually every economic indicator is pointing to another contraction in the economy. Businesses will be unable to sustain current economic output, and that translates into higher unemployment.
6. “Your used car is worth more.”
Yes, you can sell your used car for more, but then what will you drive? The lunacy here is unbelievable. In the very next paragraph, the article acknowledges that new car prices have gone up even faster in the last year than used car prices. That means trading up to a new car is even less affordable than before. The cognitive dissonance is astounding – the article manages to argue for and against the same thing in a mere three sentences.
Additionally, states like Virginia charge annual property taxes on vehicles. Even though your car is older with more miles on it, your taxes have increased because the state says it’s worth more. What a deal!
7. “Student loan forgiveness is coming.”
It remains to be seen whether the Biden administration’s unconstitutional student loan handout will actually happen, with multiple legal challenges already filed and more likely on the way. At least one court has already placed an injunction on the scheme, and another has ruled it unconstitutional with the administration appealing both.
However, if the handouts ultimately evade the constitutional challenges, they will exacerbate the underlying economic problems fueling inflation and high college tuition. Regardless, how is a political handout one of the ways that a recession is good for you?
The Washington Post is dead wrong about the alleged benefits of a recession, but at least they are one step ahead of the White House. Admitting you have a problem is the first step in recovery, and the Biden administration is still in bitter denial about the recession it is overseeing.
E. J. Antoni is a research fellow in Regional Economics at The Heritage Foundation’s Center for Data Analysis and a senior fellow at Committee to Unleash Prosperity.
