The strength of the economy is a time-honored predictor of presidential job approval and re-election chances. In the post-WWII period, only three presidents – Jimmy Carter, Herbert H.W. Bush and Donald Trump – were unable to win second terms. A poor economy during a long-running election season proved too damaging to overcome.
Against this historical backdrop, President Joe Biden seemingly shouldn’t worry too much about his chances to win against his Republican rival Donald Trump on November 5. Clearly, the president’s reelection pitch is centering around one key word: Bidenomics. Indeed, based on headline macroeconomic numbers, the economic picture looks almost picture perfect. Instead of sliding into a recession, higher unemployment or stagflation, as widely predicted by many post-Covid gurus in 2022, the U.S. economy has been growing continuously at about 3%, unemployment remaining below 4% and the inflation rate dropping markedly from a peak of 9% in mid-2022. Paul Krugman, the New York Times columnist and a Nobel prize winner in economics, is talking about Biden’s “mini economic miracle.” At his State of the Union address in March, President Biden proudly hailed the American economy as “the envy of the world.”
But despite the impressive-looking national economic data, the electorate seems unimpressed with the president’s economic achievements. At less than 40%, Biden’s job approval is lower than that of any president, including Donald Trump, in the last 70 years. More to the point, voters remain largely pessimistic about the economy and – as surveys consistently show – give the president poor marks on his handling of the national economy, many of them questioning his economic competence. Due largely to the public’s negative perception of his inflation record, most polls show President Biden trailing Donald Trump just over five months until the presidential election.
What explains this disconnect: a seemingly good-looking economy versus the low presidential credit for it? Why aren’t most Americans feeling the much-touted good economy? Call this a macro-micro contrast in economic perspectives. The macro view gives the big picture while the micro angle looks at the smaller parts of the whole, including the economic realities of daily life that matter to people.
The aggregate national economic data are not necessarily reflective of the fundamental economic reality on the ground, particularly given America’s vast income and regional inequalities. Furthermore, voters have a broader time horizon the conventionally assumed (“voters have very short memories”). Harping on about great headline statistics also risks for the president sounding out of touch to many Americans.
While economists and politicians in Washington are concerned mostly about the national inflation rate, ordinary Americans care mainly about the actual level of prices in the area where they live. Indeed, the national inflation rate has fallen considerably, but consumer prices are still rising. The overall price level today is 20% higher than in January 2021, when President Biden was inaugurated. Food, rental prices, high interest rates and mortgages are still hitting many Americans hard, particularly “hand-to-mouth” households.
Fresh polls show that inflation continues to cloud the Biden campaign’s efforts to convince voters of Bidenomics. With recession risks fading, inflation and the cost of living are the most important issues for voters and the biggest source of their financial stress. While price increases have ebbed lately, ethnic minorities (particularly, Blacks and Hispanics) and young people – all parts of the winning Biden coalition in 2020 – are struggling financially. Credit card delinquencies among those under 40 are the highest since 2010. Many of these voters may no longer be considered to be part of the “Biden 2024” coalition.
Inflation has become Biden’s biggest political weakness compared with his predecessor whose presidency is remembered by many voters as a time of stable prices. Add to this the president’s handling of illegal immigration, the Israel-Hamas conflict, the never-ending war in Ukraine to better understand Biden’s steep election challenges against a seemingly highly vulnerable opponent.
*Istvan Dobozi is a former lead economist at the World Bank. He resides in Sarasota.
Disclaimer
Member’s blog posts reflect the views of the author(s), drawing on prior research or personal experience. Freedom of expression is an essential part of the 1818 Society’s culture. The 1818 Society® is a nonpartisan, independent organization and does not take institutional positions. Members are welcome to add their comments in the box below.
KEYWORDS American economy, election, inflation, voters
I substantially agree with you, including the substantial role of foreign policy in Joe Biden‘s unpopularity. As for the macro economics, I would summarize much of what you said with these words: higher inequality and lower real wages. I find it preferable to explain real wages to people rather than getting into the difference between the price level and the inflation rate, which amazingly, makes eyes glaze over! Believe me, if nominal wages were rising faster than inflation, much of his problems would not exist.
Posted on behalf of: Peter Kretzmer, Sarasota, FL
Great blog, thanks. Discussed this with my son William (who runs an infrastructure investment fund on Wall Street). He agrees with your macro-micro analysis. Also he noted that the ill-defined “middle class” (what we would call working class in Europe) no longer feel the system works for them after the bailouts of the GFC (mostly to banks, not to home-owning mortgagees). Donald Trump represents the “burn it all down” political wing that resonates with them. Scary stuff.
Posted on behalf of: James Bond, former VP, Washington, D.C.