Why ‘bidenomics’ doesn’t work for Biden

Welcome to FiveThirtyEight politics talk. The transcript below has been lightly edited.

nrákich (Nathaniel Rakich, Senior Election Analyst): The economy has long been seen as a major obstacle for President Biden in his re-election bid. Inflation skyrocketed in 2021 and 2022, culminating in a rate of 9.1 percent last June. The same month, average gasoline prices exceeded $5 per gallon. And in the second quarter of 2022, the gross domestic product will actually decreased by 0.6 percent. It was no surprise, then, that only 28 percent of Americans approved of the way Biden was handling the economy in a July 2022 Quinnipiac University Survey.

But in recent months, economic indicators have been improving and Biden has begun to make the case. that their economic policies are working. Still Americans do not appear to be changing their perceptions of his management of the economy.. (He latest Quinnipiac poll (Put his approval rating for the economy at 36 percent.) So for today’s FiveThirtyEight Slack chat, I want to explore why that is and whether Biden has any hope of making the economy a winning issue for him in next year’s election.

But first, let’s set the scene: what do the indicators right now say about the health of the economy?

amelia (Amelia Thomson-DeVeauxsenior reporter): For an economy that has supposedly been on the brink of a recession for over a year nowIt look very nice! Real wages are finally rising faster than inflationthe labor market is weakening a little but it is still quite strong for workers and consumers. still spending at a healthy pace.

Monica Potts (Monica Potts, senior political reporter): What Amelia said. For starters, the job market remains very strong. Unemployment is in 3.8 percent, and wages are increasing. Inflation, just over 3 percent, it is finally also cooling down. The Federal Reserve appears to be succeeding in its act of lowering inflation without causing too much unemployment.

There are other signs too. For example, the Inflation Reduction Law has stimulated investment in manufacturingthat the White House has been more than happy to point out.

Amelia: In many ways, it seems like the economy is finally returning to its pre-pandemic normal, but with slightly more favorable conditions for workers. “That mythical one”Soft landing“It actually looks like it could happen.

Of course, economists’ recession predictions are never very reliable. (This is a consecrated FiveThirtyEight chorus.) And things can always change; For example, as Monica recently wrote, student loan payment is about to restart, which will mean millions of Americans will have less money to spend as they resume their monthly payments. But it is still a more optimistic situation than Many people they were predicting even just a few months ago.

gelliottmorris (G. Elliot Morris, editorial director of data analysis): That’s right. Some of the most pessimistic predictions about a recession were never really reliable, but aggregate economic expectations They continue to increase relative to what people were saying a year or even six months ago. That said, there are some not-so-positive indicators. Mortgage and Interest rates they continue to rise, for example, and the personal savings rate is almost at its all-time low. This is a different dimension of “the economy” than, say, annual wage growth, but it is important.

Amelia: Right, Elliott and it’s not clear that the Federal Reserve has ended rate hikes. Much will depend on what the August 2023 inflation data looks like when it is released later this week.

Monica Potts: Yes, I think that hints at a really big and persistent problem with asking voters how they feel about “the economy.” What that term means to people can vary greatly. Does it mean how much money they make or how much they spend on things like housing and food? Does it mean if they can afford daycare? There is a huge variation in how people feel about the economy, and many different ways that the federal government can have an effect on those things.

Amelia: Another question is whether consumer spending will begin to decline, which has been a possibility as people spend less your pandemic savings. But overall, there are other signs that Americans are feeling good about their finances. For example, a recent Ipsos survey found that the share of Americans who say they have enough money to cover an unplanned expense (54 percent) is higher than this time last year (40 percent). Fewer people also say that after paying their bills, they don’t have enough money to spend on the things they want.

nrákich: And yet, despite this, Biden is having trouble convincing voters that “Bidenomy” is working. Because?

Monica Potts: For starters, Biden inherited a truly strange economy. The COVID-19 shutdowns caused a severe and dramatic recession, but then the economy began to recover. But people’s behavior had also changed. More people were working from home and moving, they had cash to spend and supply chains were slow to restart. So overall, Americans were bitter about the economy from the moment he took office.

The recovery was hurt by super-high inflation, as you pointed out at the beginning, Nathaniel, and much of what the Biden administration has done on economic policy is the kind of slow, behind-the-scenes policymaking that voters don’t really I do not realize. Although inflation is cooling, prices remain much higher than before the pandemic; borrowers continue to see much higher interest rates; etc So I think a lot of it is because Americans in general are unhappy with the new normal that we find ourselves in.

gelliottmorris: I think that last point is really good, Monica. The proportion of people who tell pollsters that the The economic situation in general is bad. is still at the highest level since 2018. At first, that seems difficult to square with the optimistic economic indicators we talked about. But I think it’s possible that people simply have longer-term memories of economic growth and remember a time when prices were significantly lower.

Much of the discussion on this topic is tied to tracking the annual change in the consumer price index or the labor market or whatever. But if you look at the longer term, for many families things are now permanently more expensive. Even if their salaries increase, I doubt they will enjoy spending 15 percent more at the grocery store than they did before the pandemic. And those memories will take a while to fade.

Of course, that’s just my theory.

Amelia: I mean, some people think the economy is getting better. Civiqs Tracking Survey shows that Democrats, in particular, are more likely to say the current condition of the economy is fairly or very good (63 percent) than they were a year ago (53 percent). But that’s not exactly the question you’re asking, Nathaniel: It’s not just a question of whether people think the economy is improving, but whether people are seeing an improvement and saying, “Yes, Biden is making that happen.” !”. And there, it doesn’t seem like Biden is getting much traction. According to a recent Wall Street Journal surveyFor example, the share of registered voters who say they approve of how Biden is handling the economy has not changed significantly since April.

Which comes to my theory about what’s going on. I’m not sure voters were ever going to give Biden credit for an improving economy, especially since the rise in inflation occurred on his watch. It’s not like he can walk in and say, “Look at this mess my predecessor left me.”

But! That doesn’t mean this turn of events isn’t good for him, because the alternative (a struggling economy) could really hurt him.

nrákich: Interesting, Amelia. So do you think the stench of the bad economy from a year or two ago is permanent for Biden? Will you never be able to wash it, even if you fix it?

Amelia: I don’t know about permanent, but as Elliott said, prices are still higher. Americans are increasingly convinced that those high prices are here to stay. So the fact that people are starting to get used to those higher prices and say the economy is improving could be an indication that Biden is dodging a bullet. So it depends on how you put it. On the one hand, people don’t give Biden credit, which is unfortunate for him. But on the other hand, it looks increasingly likely that we will have a normal economy heading into 2024, which could be seen as a big win considering how much economic volatility we have seen since the pandemic began.

Monica Potts: I don’t think prices will go down, but it’s also possible that people will get used to them. So they could hurt Biden less, like Amelia said. And that leaves room for other issues that voters care about to take on greater importance.

nrákich: But the question is: how much does achieving that victory really matter from a political point of view? Historically, what has been the correlation between the health of the economy and the chances of presidential re-election?

Amelia: Would Biden love to see “Bidenomy” appear in high school history textbooks? Sure. But what he really wants is to win reelection, and that’s much less likely to happen if people think the economy is getting worse.

gelliottmorris: Historically we know that real economic conditions are fairly well correlated with presidential election results. If the state of the economy is broadly positive compared to a year or two ago, then the party in power tends to get a boost. Of course, economic indicators do not fully predict election results, but they have a residual impact.

The good news for Biden on this front is twofold: First, voters tend to start making these retrospective evaluations closer to the election. And second, that they look just a couple of years ago. That means there is time for things to get even better for him and for him to be rewarded.

However, the bad news for Biden is that there is still time for things to turn against him!