Do politicians understand economics even a little?

David MoonBlog

I saw a meme floating around The Google last week implying that Representative Alexandria Ocasio-Cortez (D-NY) had already parlayed her brief political career into a $29 million net worth. This claim didn’t pass the smell test, so I reviewed her most recent financial disclosure. Based on the broad categories used in these disclosures, her net worth is somewhere between negative $47,000 and positive $30,000.

While I’m glad Rep. Ocasio-Cortez doesn’t seem to be building a political shakedown empire, her balance sheet doesn’t strike me as a glowing reference for someone to serve on our nation’s primary taxing authority.

In defense of Ms. Ocasio-Cortez, however, a lack of understanding of economics might actually be a prerequisite for serving in political office, not a disqualifier.

Donald Trump recently threatened to impose a 100% tariff on possible Chinese automobiles manufactured in Mexico. Maybe this was another incident of something popping out of his mouth without thought. Of course, it might have been part of a brilliant, albeit unlikely, negotiating ploy directed at Xi Jinping. (Okay; maybe not.) But if you think the prices of autos in the U.S. are too high, the last thing you would want to do is depress a potential supply increase.

Are politicians stupid or do they just assume we are? Joe Biden has proposed giving $10,000 to certain homebuyers to help mitigate the impact of a 40% increase in home prices since 2020. Thats the equivalent of a doctor telling an obese diabetic patient that he will feel better if he sits on the couch and eat candy bars.

The escalation of housing prices has its roots in the mortgage crisis of 2008-2009. But the influx of “free” Covid stimulus money was the match that lit that fire and poured trillions of dollars of fuel on it. Until the supply of housing catches up with more than a decade of underbuilding, giving homebuyers $10,000 will simply drive the house prices even higher.

It is possible, if not likely, that Biden doesn’t really expect to give anyone $10,000 to buy a new house. It could be a simple political gesture. As politics, it’s probably smart. The President gets to say he is fighting to lower home prices, then blame republicans if no bill is passed. “These MAGA extremists hate would-be homeowners!”

Great politics. Horrible economics.

I can hardly blame Biden’s advisors for assuming voters are economically ignorant. It must be frustrating for them to constantly hear people talk about higher inflation, when inflation has significantly declined. But consumer prices haven’t declined – and they aren’t going to. And any attempt to lessen the pain of higher prices by printing and distributing cash will simply make the problem worse.

David Moon is president of Moon Capital Management. A version of this piece originally appeared in the USA TODAY NETWORK.