President Joe Biden on Wednesday launched his effort to persuade voters that his policies have made the economy stronger and more resilient and will continue to do so far into the future. Indeed, the US economy has the fastest growth rate and lowest inflation rate of any of its developed-market peers. But all political speeches have a fair amount of positive spin that deserves a reality check, and this one was no different.
Biden spent part of his speech at the Old Post Office building Chicago trumpeting his record on employment. Indeed, as my Bloomberg Opinion colleague Matthew Winkler has noted, Biden has created the equivalent of six times more jobs than the last three Republican presidents combined. Biden himself pointed out that the unemployment rate has been below 4% for a record 16 consecutive months. “Bidenomics is working,” he said in Chicago, defining the term as building the economy from the middle out and bottom up — not the top down.
When you pull back the covers, however, the broad numbers mask a highly uneven labor market. My Bloomberg Opinion colleague Claudia Sahm has pointed out that although employment reached its pre-pandemic level last summer on a national basis, some 37% of states remain well below where they were, including some large ones such as New York and Ohio.
Such unevenness, along with still elevated levels of inflation, help explain why measures of consumer sentiment, while rising from their recent lows, have failed to rebound to pre-pandemic levels. On Tuesday, the Conference Board released its monthly consumer confidence index for June, and “the expectations gauge continued to signal consumers anticipating a recession at some point over the next 6 to 12 months,” said Dana Peterson, the chief economist at the Conference Board, according to Bloomberg News. That doesn’t bode well for Biden as the 2024 election approaches.
Then there’s issue of income inequality, which remains stubbornly wide and unlikely to improve after the expiration of most of the pandemic-era fiscal stimulus measures designed to alleviate poverty and food insecurity. As of January, 11.2% of adults said they sometimes or often didn’t have enough to eat, up from 9.8% near the start of the pandemic in 2020, Census Bureau data found.
The problem for Biden is that his three signature pieces of legislation — the Inflation Reduction Act of 2022, the bipartisan infrastructure package of 2021 and the Chips and Science Act of 2022 — are all transformative for the US economy but won’t pay dividends until years into the future. And many of his critics have blamed this spending for spurring inflation and blowing out the budget deficit.
“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 for Bloomberg Economics
Right around the time Biden was ending his speech, the bipartisan Congressional Budget Office issued a report projecting US debt will continue to grow, from 98% of the US economy this year to a historic 181% in 2053. The CBO also projected that annual deficits will average 7.3% of gross domestic product per year over the next 30 years, double the average over the past 50 years as a percentage of the economy.
Fortunately for Biden, November 2024 is still a long ways off, leaving him plenty of time to correct some of these deficiencies in the labor market and improve consumer sentiment. If he can’t, then we might end up with back-to-back one-term presidents.
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