3 reasons why Biden’s strong economy is unpopular

3 reasons why Biden’s strong economy is unpopular

Photo: Joe Raedle/Getty Images

The American economy is the envy of the Western world. Our country’s economy grew at an annual rate of nearly 5 percent in the last quarter. The unemployment rate is hovering at historic lows. The percentage of prime-age Americans in the labor force is higher than it has been since the 2008 financial crisis. Thanks to the abundance of jobs, low-income workers have clawed back nearly 25% of the increase in wage inequality that accumulated between the election of Ronald Reagan and the election of Joe Biden. Wages have been rising faster than consumer prices for eight months now.

By contrast, the European economy is stagnating. While US GDP is barely below its pre-pandemic trend, EU GDP is 5% below its pre-pandemic trajectory. But despite this slow growth, European consumers were saddled with inflation rates similar to those experienced by their American counterparts.

Graphic: Financial Times

Thus, Joe Biden’s economic management appears objectively strong. The pandemic has imposed real costs on economies across the West. Closing large sectors of the economy, and disrupting fragile supply chains, will inevitably lead to a decline in countries’ productive capacity. Thus, inflation is inevitable, unless governments choose to focus the costs of economic adjustment on the most vulnerable groups by tolerating a long period of high unemployment and poverty rates. But within the constraints imposed by a global historic crisis, Biden led the US economy to a superior recovery. The United States has enjoyed stronger growth – without greater costs to inflation – than Europe. And as Martin Sandbo of Financial Times He writes that this difference is largely due to America’s superior fiscal policy; That means Biden’s American Rescue Plan and Trump-era coronavirus relief bills.

However, the American public takes a very gloomy view of Biden’s economy. In New York recently timesIn a 2024 Siena College poll of battleground states, only 19% of voters described the economy as “good” or “excellent.” By a margin of 59% to 37%, battleground voters rejected Biden’s economic record.

These results are consistent with a Bloomberg/Morning Consult poll in seven swing states, which found that only 35% of voters trust Biden on the economy, while 51% said things were better under Donald Trump.

More direct measures of economic satisfaction—untainted by a direct link to partisan politics—tell a similar story. The University of Michigan Consumer Confidence Index never returned to its pre-pandemic peak, and has declined steadily for four straight months.

What explains the dissonance between the objective virtues of Biden’s economics and the overwhelming discontent among voters? Many powerful Democrats tend to blame the media, the president’s inept messaging, or the inevitable “bad feelings” of a nation that has not yet recovered from the shocks of the pandemic.

It is plausible that all of these factors influenced public dissatisfaction. But there are also several objective features of economic life under Biden that could explain voters’ dislike of the president. Here are three reasons why Americans are unhappy with Biden’s economy:

On the one hand, voters’ dislike of Biden’s economics does not seem difficult to understand: Although real wages have been rising since February, the first two years of Biden’s presidency saw an exceptionally long period in which consumer prices outpaced payroll growth. In other words, for much of the Biden era, the purchasing power of American workers has been declining.

Graphic: Statista

Again, this reverses in 2023. The real hourly wage for production workers and non-supervisory workers in the United States is now higher than it was before the pandemic.

But years of rapid inflation have left the price unstuck level Much higher than in 2019. In the long run, the nominal price of consumer goods should matter less than their price relative to wages. In 1950, the price of a regular television was $200. Today, one can pay approximately $500 for an average quality TV. But despite the higher sticker price, TVs are now objectively much cheaper, because they cost a much smaller share of the average worker’s income. But it has been less than a year since inflation stopped outpacing wage growth. Therefore, people still find the nominal prices on their grocery bills insanely high.

This reality was confirmed by a recent poll conducted by Blueprint in collaboration with YouGov, which found that 64% of voters considered lower prices for “goods, services and gas” to be their top priority, while only 7% said the same about “jobs.” The Biden administration’s economic message has understandably focused on job creation, because its success on this front is unambiguous. However, 15% of Americans are retired, and the vast majority of American workers have remained steadily employed throughout the pandemic. Thus, the biggest beneficiaries of job growth under Biden constitute a small portion of the general public, while all Americans are directly affected by consumer prices.

The idea that Biden’s first two years in office have poisoned his image as an economic manager is consistent with international political trends. As Matthew Iglesias has noted, almost every head of state in a G7 country has abysmal approval ratings. Biden’s 39 percent is actually slightly better than Justin Trudeau’s 33 percent. In France, Emmanuel Macron’s support rate is 26 percent; In Germany, Olaf Schulz’s percentage is 25 percent; In Japan, Fumio Kishida with 22 percent. Interestingly, the only G7 leader who received significantly better marks than Biden is Italian Giorgia Meloni, who took office. after The worst of the post-Covid inflation crisis is, and therefore not related to it.

Americans’ income and savings are not determined by wages alone. Another important determinant of household finance is government transfer payments. In 2021, the American Rescue Plan’s stimulus checks, expanded child tax credit, and enhanced unemployment benefits spurred a historic jump in Americans’ incomes and personal savings.

But since these programs were temporary, their influence dissipated over the next two years. As a result, Americans saw historically anomalous declines in their annual incomes and bank balances in 2022. As Matt Bruenig notes, in a typical year, about 45% of people have less income than they did the year before. But in 2022, that share rose to nearly 60%, a result of inflation and the disappearance of pandemic-era transfer payments.

Image: Popular Politics Project

Drawing: unique

Americans’ incomes are certainly higher today than they were before the pandemic. Their balance sheets are almost equally strong. It wouldn’t make much sense for voters to be upset about falling incomes just because they got a $1,400 check in 2021 but not in 2022. However, it is plausible that the widespread experience of declining incomes and savings has soured the national mood.

Finally, although inflation will slow in 2023, interest rates have steadily risen to levels not seen in decades. Since much of US consumer spending is financed by debt, high borrowing costs limit the impact of the price slowdown.

Moreover, squandering household savings in the pandemic era exacerbates the challenge posed by high interest rates. With no rainy day money to fall back on, consumers are increasingly relying on credit cards to fund everyday expenses. Credit card balances jumped 15 percent in the fourth quarter compared to the previous year, according to the Federal Reserve Bank of New York. The average consumer credit is now at its highest level in 10 years.

Meanwhile, credit card rates have risen more than 5 percent since the Fed began raising interest rates. As a result, the rate of credit card delinquencies among American households has reached its highest levels since the end of 2011.

Meanwhile, with mortgage rates at a two-decade high of 8%, many Americans feel that one of their core economic aspirations — homeownership — is now out of reach.

All of this means that voters’ disapproval of Biden’s economic management has plausible roots in objective circumstances. But this is not necessarily bad news for the president. If inflation continues to moderate, the Fed may cut interest rates next year, relieving some of the pressure on consumers. At the same time, with each passing day, the post-Covid inflationary boom is receding into the past. If the US economy can continue on its current path through Election Day, voters may be more tolerant of Biden in November 2024 than they are today.

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