President Joe Biden is about to launch his most ambitious effort to persuade skeptical voters that the US economy is thriving on his watch, a case that’s key to his re-election prospects.
(Bloomberg) — President Joe Biden is about to launch his most ambitious effort to persuade skeptical voters that the US economy is thriving on his watch, a case that’s key to his re-election prospects.
The president will deliver what the White House is calling a major address in Chicago on Wednesday to outline the theory and practice of “Bidenomics.” He’ll draw a contrast with the small-government philosophy that Republican opponents have espoused for decades, and argue that his more interventionist approach is already delivering benefits — for lower-income Americans in particular — and rebooting US industry.
It’s the clearest sign yet that Biden, 80, plans to put the economy at the center of his campaign for a second term — which could prove a high-risk strategy. After two years of rapid inflation, Americans are generally unimpressed by the state of their economy, and things could get worse if there’s a recession before election day, as many forecasters expect.
The Biden speech won’t contain new proposals, aides say. Instead, the president is seeking to focus on strengths of today’s economy – especially the hot jobs market – and combine that with a story about how his initiatives will drive a deep and lasting transformation.
Sweeping measures enacted over the past couple of years – including incentives worth hundreds of billions for clean energy, semiconductor manufacturing and infrastructure — add up to the most ambitious effort to kickstart US industry in decades, many economists reckon.
‘Starting to Kick In’
The drawback, from an electoral point of view, is that they won’t bear fruit right away. Even if the new industrial policy is the kind of game-change that gets plaudits from future historians, it might not do much for 2024 voters.
The CHIPS and Science Act and Inflation Reduction Act, both signed by Biden last year, have spurred a boom in factory construction, but some of those new plants won’t come online for years. Road- and bridge-building has increased under the previous year’s infrastructure bill, but spending from that pot won’t peak until 2026.
“Those pieces of legislation are just starting to kick in,” says Mark Zandi, chief economist at Moody’s Analytics. “Those are things that are going to play out over a longer period of time.”
Shorter-term, what’s dominated the economic conversation in the US is inflation.
The $1.9 trillion stimulus package passed by Democrats in March 2021 helped supercharge the job-market recovery that Team Biden is touting, but it’s also one reason why the cost of living has risen.
What Bloomberg Economics Says
“Bidenomics has important long-term goals. In the short term, boosting spending in an economy already operating at close to capacity has added to inflation, and taming that inflation has raised the prospect of a recession.”
— Anna Wong, chief US economist
— Click here for full report: Bidenomics vs. Fed – How Industrial Policy Upped CPI
The post-Covid price surge has eased lately, with consumer-price inflation falling to 4% from a peak above 9% a year ago. Still, American households are facing higher prices for a whole range of things, from groceries and clothes to hotel rooms. And by one measure, average hourly earnings have only just caught up with rising prices.
Biden hurt himself politically in 2021 when he called inflation temporary only for Americans to be battered by higher prices for years. His GOP rivals are likely to keep hammering him on that topic all the way through 2024.
Poor Marks
The Republican National Committee said in a statement that Bidenomics is “failing,” citing polling data showing Americans’ dim views of the economy and highlighting inflation’s effects on wages and savings.
Almost six in 10 Americans said they disapprove of the way Biden has handled inflation and prices, according to a June Economist/YouGov poll — while about half gave him poor marks on jobs and the economy overall.
In fact, the strength and resilience of the jobs market has repeatedly surprised economists.
Earlier this year, the unemployment rate fell to 3.4%, matching the lowest level since the 1950s, and it hit a record low for Black Americans. Employers continue to add hundreds of thousands of jobs each month. Roughly eight out of 10 Americans ages 25-54 are currently employed, a historically high level.
Biden’s top officials say that’s encouraging them to think that the doomsaying about an imminent recession is overdone.
“There have been these repeated predictions, and yet what we’ve seen in the actual data has been a lot of resilience,” Lael Brainard, who left the Federal Reserve this year to head Biden’s National Economic Council, said on Tuesday. “We’ve actually seen that stretch of a strong labor market improve.”
Cracks are beginning to form, though. Rising interest rates, as the Federal Reserve fights inflation, have led to a spate of layoffs in technology and finance. Last month, the unemployment rate posted its biggest increase since 2020.
‘Significant Blemish’
What’s more, the pandemic stimulus that bolstered household finances – and helped consumers to keep spending – may be running out. The average household in the bottom 40% of the income distribution now has liquid assets worth $1,200 less than they did before Covid, according to Bloomberg Economics.
The timing of a potential downturn — and its severity — are among the many unknown factors that could influence an election still 16 months away. And there are plenty of non-economic issues that will sway votes, from abortion rules to Biden’s age and the escalating confrontation with China.
As for the economy, Biden and his aides argue that many countries face similar challenges in the wake of Covid and Russia’s invasion of Ukraine – and that the US has outperformed peers on many measures, including jobs and inflation.
The clearest achievement that Biden can point to, says Zandi, is that “the economy came roaring back from the pandemic, and is now at full employment and everyone who wants a job has one.” Meanwhile, inflation is still “the most significant blemish in his economic record.”
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