Bidenomics won’t lead to a smooth outcome.

In the‍ contrast ⁤between elites — ⁤in Washington and ‌on‌ Wall Street — and the working-class Americans across our country, two words banded about​ in recent months stand out: “soft landing.”

In economic⁢ parlance, the⁢ term refers to whether a combination of monetary policy decisions ​by ​the Federal Reserve, macroeconomic forces, and sheer good luck ‌can manage to lower‌ inflation levels⁣ without crushing economic activity to the point‌ that it causes a recession‍ and/or massive job losses.

But⁢ to people in the nation’s ⁢heartland,⁣ the words “soft landing,” as they relate to our ‍economy, represent something⁢ between a⁣ misnomer and ⁤an insult. On multiple levels, millions‍ of families​ have ⁢been getting kicked‌ in the teeth for years — and will⁣ continue to do so, whether a recession arrives⁢ or not. To suggest that there’s anything “soft” about it just shows the people who run our economy are out of touch.

Inflation‍ Baked into⁤ Prices

A few weeks ⁤ago, the latest inflation report showed ‌that the consumer price index rose by “only” 3.7 percent in September. That’s‍ down by more⁣ than half from the 40-year high of⁢ 9.1 percent in June 2022. ‌But lower levels of inflation ‍haven’t begun to solve the problems created by “Bidenomics.”

While inflation may have⁤ abated somewhat — that⁣ is, prices are rising more‍ slowly — the American economy hasn’t experienced deflation, with prices actually falling. ​Even if the price of a hypothetical sofa may remain at $1,200 for a while, ⁢it has ⁢very little chance of dropping back to the $1,000 level where it ​stood before inflation took off during the pandemic.

But ‌people ‍who⁢ walk into that furniture store — or‌ the grocery store, or stop ⁤by their gas ⁣station — still have sticker shock every ⁢time ​they go to ⁣buy‍ items. Their incomes haven’t⁣ kept‌ up with the spike in prices over the past few‌ years, so they feel poorer — because they are poorer.

Home Ownership: Haves and Have-Nots

Over and above the question​ of ‌family budgets, families face ‌tough ‌decisions about where⁣ to live. A decade-plus‌ of ‌ questionable monetary policy has created a two-tiered housing system since the pandemic that will take ‍years, if not longer, to unwind.

A friend ​of⁣ mine faces the dilemma that many young families are contemplating: ⁣He and his wife can’t afford to⁤ buy ⁤a home. They make good money and don’t live in‌ an area (like Washington or ‍San Francisco) with‍ very high home prices. But the yo-yo-ing of monetary policy has effectively put homeownership out of reach for them.

Consider what it now takes to buy a home ⁤ costing $500,000.⁣ Assuming‍ a 10 ‌percent down payment⁣ and an interest rate of ⁣8 percent — mortgage rates have approached this level in recent weeks — the ​estimated ⁣monthly payment​ comes to⁣ $3,489. That monthly amount doesn’t include taxes or insurance — ​and‌ it assumes ‌that a family has more than $50,000 ‍up​ front to fund ‍a ⁤10 percent down payment and closing costs.

But if mortgage rates were still at the‌ 3 percent level, their monthly payment⁣ would‍ come ‍to only⁣ $2,085. The ⁤difference amounts to over $1,400 per month in ⁤interest costs alone.​ And for many families, that sum‍ is the difference between having an affordable home within reach and having to put⁢ the “American Dream” on⁢ hold.

Undoing⁤ the Fed’s⁣ Damage

Seeing‌ these numbers, many people would point the finger at the Federal Reserve’s interest rate policies‌ for causing this mess. The‍ Fed is⁣ one major cause ‌of the problem‍ — but not for⁤ the reason one might think.

Prior to⁢ the early 2000s,​ mortgage rates of 6 percent,​ 7​ percent, 8 percent, ⁢or even higher were the norm, not the exception. But⁤ over ‌the past two⁢ decades, financial markets — both the stock‍ market and the housing market ​— have become addicted to cheap⁢ cash at ultra-low interest⁤ rates. Over that time, the ⁣Fed⁢ has largely obliged, printing money on numerous occasions since the financial ‌crisis to keep interest rates arbitrarily low.

That money-printing helped‍ stoke inflation ⁤since the pandemic, which the Fed is now trying to resolve by raising interest rates back to more historically appropriate levels. But it has​ also exacerbated inequality by‌ creating asset bubbles and ⁤setting up ⁢classes‌ of “haves” and “have-nots.”

Over time,‍ the dynamic outlined above will have⁢ an effect on housing prices. ​Even ⁢if the housing market‌ doesn’t crash,‍ prices will either stay‌ flat or⁣ soften for several years, because a house that’s ‍affordable‍ with a 3 percent mortgage can⁣ easily become unaffordable when mortgage rates hit 8 percent.

But⁣ the ⁣“haves” — those families ​lucky enough⁢ to have locked into low-rate mortgages‌ over the ​past ⁤few years — ​won’t want to sell if doing so means they need ⁣to take out a new mortgage ​at​ a ⁣much higher rate. As a result, it may take years for the ⁣housing market to become “un-stuck,” as no one will want ​to​ move. This dynamic will also likely affect the job market because relocating to take a new position⁢ now imposes a huge financial penalty given the change in⁣ mortgage‌ rates.

Long ⁣Return to Normalcy

The bottom line: Undoing ​all the damage ⁢of​ this ill-advised monetary policy —‍ beating​ back inflation, and‍ moving to a stable housing market not pumped up by cheap Fed money — will take time and impose sizable economic costs ​on families across the country. And that’s assuming that all this credit tightening doesn’t spark⁢ a major recession, another‌ financial crash, or both.

Given the level of pain⁢ involved in this adjustment — both that already‌ inflicted ⁤and‍ that yet‌ to come — no one should ‍give the ‍Fed credit for “engineering a ‘soft landing’” ⁢even if the economy ‍doesn’t crash. ‌Just as an arsonist should ⁣win no points for putting out​ his own‌ fire, no one should lionize the Federal Reserve if it manages ⁢to resolve economic problems largely‌ of its own making.