The Patriot Post® · Are High Interest Rates the New Normal?

Those of us who’ve recently invested in big-ticket items like cars and houses have no doubt noticed that it’s impossible to borrow at the same rates that we enjoyed not too many months back. Mortgage rates that were in the 3% range just a couple years ago have now edged up past the 7% mark, meaning a house that was affordable to a middle-class family is now twice the price at more than twice the interest. In other words, out of reach.

The experts drone on about a rising “neutral rate” or try to convince us that some inflation is better than deflation, such as in a recent Washington Post op-ed by Catherine Rampell. In that piece, cheerfully titled “Why prices are never going back down,” Rampell writes: “Even if the prices you pay are always trending upward on average, they’re usually growing so slowly that you have time to get acclimated to the new levels. Over the past few years, prices rose so fast that you’re probably still experiencing constant sticker shock. Most people have a mental model of how much a weekly grocery bill or dinner out ‘should’ cost, and it’s not matching up with reality.”

She’s got that right, but her main point is that we’ll probably never see prices return to pre-pandemic levels. Behold, the new normal.

As The Wall Street Journal points out, for the first time since the early surge of inflation thanks to Joe Biden, wages have increased faster than prices over the last couple of months — not by much, but slowly and steadily. Yet those little gains are in serious danger of being overtaken by the high interest rates on the credit cards more and more of us have been using to stay afloat. “Some households are already stretched thin,” the Journal says. “The percentage of credit-card and auto-loan balances that became past due rose above prepandemic levels for the first time in the second quarter, New York Fed data shows.”

Meanwhile, Bloomberg reports that all but the richest 20% of Americans have now run out of savings. “Here’s the over-riding question,” says commentator John Ellis in response. “If 80% of the electorate is tapped out now, what will they be doing about it six or twelve months from now? They have two options: Either cut spending to make ends meet or lay on more debt to keep pace with their expenses. Either way, it’s not the way it used to be, when interest rates were very low, there was money in the bank and going out to dinner didn’t cause mini-panic attacks (will my credit card work?). The economic environment for most Americans is challenging. Everything is not fine. A storm is coming.”

Moreover, this latest burst of Fed-initiated rate hikes has further dimmed the financial future for young adults. Gen Z may become the throwback cohort — back to a time when extended families stayed together at the family farm — but their modern-day brethren are moving back in with their parents to the rooms they had as teenagers. A recent poll revealed that 45% of those ages 18 to 29 are living at home with their families — a figure not seen since the 1940s. And 60% of young people report that they’ve moved back home at some point in the last two years.

Back then, though, the grandparents of Millennials and Zoomers found good post-war jobs once the economy had readjusted to a peacetime bearing. And they found their way out toward newly developing suburbs, where they gave birth to the Baby Boomer generation. The prospects for today’s youth aren’t as optimistic.

Whether it’s disgruntled Zoomers or fed-up parents, the blame is being channeled in the same direction: right at the Biden administration. You know it’s bad for “Normalcy Joe” when the public is pining for a return to those tumultuous days of the Trump administration. Indeed, The Donald’s approval rating stands at 48% — a figure much healthier than it was during most of his term in office. As Ed Morrissey opines at Hot Air: “Voters may be only partly engaged on other policy areas such as foreign relations, national security, housing, or even education, but Americans live the economy every single day. When prices go up and buying power erodes, they know it, and that reality cannot be spun into the political equivalent of fool’s gold.”

Alas, the damage is now done, and it’ll be a long time, if ever, before we get back to where we were. That’s not to say it can’t be done — only that it’ll take a Reaganesque recovery to start setting things right. Trump rebuilt the moribund economy of the Obama years, and our next president will need a similar sort of achievement to pull us out of the mess that Bidenomics built.

(Updated)