President Joe Biden touted his economic agenda, contrasting it with the small-government philosophy Republicans have espoused for decades, as he sought to persuade skeptical voters the economy is thriving and bolster his reelection prospects.
(Bloomberg) — President Joe Biden touted his economic agenda, contrasting it with the small-government philosophy Republicans have espoused for decades, as he sought to persuade skeptical voters the economy is thriving and bolster his reelection prospects.
“The trickle-down approach failed the middle class,” Biden said Wednesday of Republican policies, including those he said were enacted by his predecessor, former President Donald Trump, the frontrunner for the GOP nomination. “Under trickle down economics, it didn’t matter whether you made things as long as you help a company’s bottom line, even if that meant seeing jobs and industries go overseas for cheaper labor.”
The president argued his more interventionist approach is already delivering benefits — for lower-income Americans in particular — and rebooting US industry. Biden said the US was enjoying the highest growth among the world’s leading economies since the coronovirus pandemic, citing 13 million jobs added.
“Bidenomics is working,” he said, embracing a term to highlight his economic philosophy and policies, as he spoke at the Old Post Office building in Chicago.
Biden said his policies made smart investments, grew the middle class and promoted competition to lower costs and help small businesses.
The speech was 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.
“I’m not here to declare victory on the economy. I’m here to say we have a plan that is turning things around incredibly quickly,” said Biden.
Sweeping measures, including incentives worth hundreds of billions of dollars 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 politically 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 on everything 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.
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.
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 and his top aides say that’s encouraging them to think the doomsaying about an imminent recession is overdone.
Before departing for Chicago, Biden chided economists who have repeatedly predicted “there’s gonna be a recession next month” and that hasn’t materialized.
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.
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 tensions with China.
Biden and his aides argue that many countries face similar economic 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.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.