About 30 years ago, Bill Clinton’s political strategist James Carville coined a phrase he was confident would help Clinton defeat then-President George HW Bush in the general election.
With the United States in the midst of a recession at the time, Carville believed that hammering on Bush’s economic policies would help Clinton win. Clinton listened and the rest is history. He won the 1992 election, made Bush a one-term president, and forever immortalized Carville’s slogan as conventional political wisdom parroted by pundits in every presidential campaign cycle since.
As writers, we usually loathe such clichés. In this case, however, the economy makes us feel a little, well, stupid. At least as far as Joe Biden is concerned.
He runs an economy with one of the lowest unemployment rates in decades, with 31 straight months of job growth and wage earnings above inflation. Fortunately, economic forecasts that predicted we were in the depths of a recession appear to have been wrong.
But the voters don’t believe it. A CBS poll found that 34 percent of people approve of the way Biden is handling the economy. A Siena College/New York Times poll was even grimmer, with just 20 percent saying the economy was “excellent” or “good.”
The sticking point seems to be the dissonance between the rosy picture of economic data and how people actually feel about spending. For the average consumer, employment numbers and wage growth numbers are mostly just white noise. All they know is that when they scan their HEB receipts, groceries are significantly more expensive than they were a year ago.
Democrats want you to believe that Biden has all the blame for the boom, while Republicans say he’s the reason inflation has run so high. The truth is, it’s a little bit of both and neither. Conclusion: Binomics is not that bad.
When Biden took office in 2021, he took a calculated risk that he could quickly rebuild an economy weakened by the COVID-19 pandemic. After learning his lesson from the Obama administration’s more muted stimulus during the 2008 recession, he made it big. Very big: a $1.9 trillion stimulus bill that puts money right in people’s pockets in the form of stimulus checks, expanded unemployment insurance and a more generous child tax credit.
The financial injection from the federal government ultimately proved to be a double-edged sword. This resulted in a faster than expected economic recovery, with exceptional monthly employment gains. But as consumers spent the money like Powerball winners, pandemic-crippled supply chains couldn’t keep up with the surge in demand, and prices rose at their fastest pace in 40 years.
Even now, with Biden touting the lowest inflation rates in two years, that doesn’t mean commodity prices are falling; They just don’t skyrocket as rapidly as they did before.
Here you could ask about the Inflation Reduction Act, which came into effect a year ago. After all, it’s all about bringing down inflation, isn’t it? Certainly, Biden’s crucial legislative achievement has played some role in cooling our overheated economy.
Not exactly. In fact, the bill earned that title last year as part of a rebranding of Biden’s “Build Back Better” agenda, as rising inflation rates were seen as a political hurdle to Congress passing another big spending bill. Democrats identified aspects of the law providing for health care and childcare grants and reducing prescription drug costs as important provisions that would ultimately reduce costs for families. Given Americans’ sour sentiment about inflation, the renaming appears to have been a flop.
The most notable impact of the bill, however, has been that it has boosted investment in clean energy, with $369 billion in tax credits that will hopefully significantly reduce carbon emissions that contribute to climate change. Since the bill was signed into law, US sales of electric vehicles have increased by 55 percent, thanks in part to a $7,500 tax credit. European companies like Volkswagen are committing to building battery plants in the US to capture part of our growing EV market share. Investments in solar energy are as resilient as ever, as a leading solar panel manufacturer has exhausted its supply by 2026.
All of these investments are undoubtedly good for the economy in the long run as they should create quality jobs with decent wages and make the planet healthier for generations to come.
But whether Biden can really take credit for the economy’s current success in the course of his re-election campaign will be a more difficult question.
Beyond the gradual clearing Given the pandemic-related shortages, most of the real inflation-cutting is thanks to the Federal Reserve, which began raising interest rates dramatically in March 2022 to curb consumer spending, aiming to bring inflation rates down to 2 percent. Reaching that target could be difficult given gas prices have risen 30 percent over the past month. Inflation rates could rise, job growth could slow and suddenly we are in for a recession. Nevertheless, many banks and economists have revised their forecasts. A so-called “soft landing” – low inflation without a recession – seems possible.
Biden has always been good at connecting with voters on an emotional level. His chances of a second term will likely depend on whether he can convince them that their tepid perception of the economy is not “dumb” but temporary.
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