Biden Tries to Pitch Bidenomics Once More
President Biden plans to use his State of the Union address on Thursday night to tout his administration’s accomplishments on the economy, arguing that “Bidenomics” has been a success while casting blame on corporations for high inflation.
It will be a difficult sale to make with much of the American public.
Over the past few months, as he has tried to prop up his flagging popularity with the American people, Biden has frequently stressed the positive aspects of the U.S. economy, including a buoyant jobs market and impressive growth that defied forecasts of a recession.
But polls suggest that this has not raised voters’ estimation of his leadership on economic issues. Sixty-0ne percent of the public say they disapprove of the way Biden is handling the economy, according to the most recent polling from Gallup. While there is a partisan split, with two out of three Democrats approving and just four percent of Republicans approving, independents overwhelmingly disapprove. Just three-in-ten independents says they approve of Biden’s handling of the economy.
Americans Do Not Like the Biden Economy
A big problem for Biden is that the public is not just unhappy with his leadership. They are unhappy with the state of the economy. Fifty-seven percent of registered voters rate the economy as either fairly bad or very bad, according to the latest poll from CBS News and YouGov. Less than a quarter of voters say their personal financial situation has improved in the last few years.
Biden desperately wants to overcome both the public’s disapproval of his policies and dissatisfaction with the economy because many voters say the economy will be a major factor in their vote this November. According to the CBS/YouGov poll, 82 percent of voters say the economy will be a major factor, more than any other issue.
Biden trails his chief rival for the White House, former President Donald Trump, in most polls asking Americans for whom they would vote. And Biden’s overall approval rate, according to Gallup, has sunk to 38 percent.
The Biden Administration’s Hollow Economic Boasts
The Biden White House is frustrated that the public does not give it the credit on economic issues that administration officials are convinced they deserve. But on many of the accomplishments they point to, the public has a good reason not to give much credit to Biden because they were already achieved when Trump was president.
Take the unemployment rate. This has fallen to 3.7 percent, a low rate by historical standards. But it was even lower under President Trump before the pandemic struck, falling below four percent in the summer of 2018 for the first time in decades. And that wasn’t a short-lived dip. On the eve of the pandemic shutdowns, in February 2020, the unemployment rate was still 3.5 percent.
Biden is also likely to tout his administration’s job creation record. The economy has added an impressive 14.8 million jobs since January 2021, when Biden took office, and this January, growth of around 10 percent. That puts him on track to match or exceed some of the best job growth numbers seen in recent decades, including the job booms in Bill Clinton’s first term and Ronald Reagan’s second term.
That record, however, is distorted by the historic job losses inflicted by the pandemic. Compared with February 2020, jobs are only up 3.5 percent. This lends credence to the argument that many of the jobs that Biden takes credit for are not the result of his policies but the result of the whipsaw shutdown and recovery wrought by the pandemic.
Paying the High Price of High Prices
Prices are still rising rapidly, even though they have fallen from the four-decade highs hit earlier in Biden’s presidency. The consumer price index (CPI), the government’s broad measure of household inflation, was up 3.1 percent in the 12 months through January. That’s higher than it has been in any 12-month period prior to Biden taking office since 2011.
While Biden is likely to argue that inflation has been falling, that is no longer true. Inflation has been rising again for three consecutive months. If inflation were to run as hot as it did in January for the next 11 months, the annual rate would rise to 3.7 percent.
The inflation numbers have been flattered by the clearing out of supply chain problems, lower energy prices, and businesses responding to higher prices with more production of goods. Core inflation, which excludes energy and food prices, rose at an annualized rate of 4.8 percent in January.
Services inflation has been seriously accelerating. The consumer price index for services was up five percent in the 12 months through January, nearly twice as much inflation as was typical in the prepademic period. January’s monthly number rose to 0.7 percent, which annualizes to an inflation rate of 8.7 percent, the worst since a year ago.
One reason Biden’s argument that inflation has fallen has failed to catch on is that Americans are still feeling the cumulative effect of years of rapidly rising prices. Grocery prices, for example, did not rise that much last year, but they are up 21 percent since Biden took office. During Trump’s first three years in office, the index of food inflation rose a total of just 1.4 percent.
The bite of inflation stings all the more because wages have lagged behind prices. The inflation adjusted median weekly wage was $373 in the first quarter of 2021. As inflation soared, inflation-adjusted wages fell and kept falling, hitting bottom at $359 in the second quarter of 2022. They have since recovered, hitting $371 in the final quarter of last year, but are still lower than they were when Biden took office.
The Inflation Buck Never Stops With Biden
Given how unhappy Americans are about inflation, it’s not surprising that Biden has consistently attempted to avoid taking responsibility for inflation. Recently, Biden has trotted out his blame-thrower to light up businesses for “price gouging.“ But that’s a term usually reserved for abrupt and extreme price increases of particular goods in the face of an emergency. Think of a store jacking up the prices of bottled water just ahead of a hurricane. And that’s already illegal in much of the country.
The persistent and widespread rise in prices cannot be accurately described as “gouging.” Instead, it is just inflation that results from a mismatch between supply and demand.
Neither can inflation be chalked up to corporate greed, or “greedflation” as some Democrats have taken to calling it. In the first place, corporations did not suddenly become greedier when Biden took office. Businesses are always trying to maximize profits. It doesn’t really make much sense of the pattern of inflation. Does anyone think that greed saw a surge from the spring of 2021 through the spring of 2023 and then began to subside last year, only to return in recent months?
Corporate profits did rise as inflation rose, but the cause-and-effect probably runs the other way. When demand for goods surged during the pandemic, businesses were able to raise prices even though their costs had not yet increased. If businesses had not responded with higher prices, the pandemic shortages would have been even worse. Higher prices rationed goods when supply fell short of demand.
As Peter Coy of the New York Times explained recently:
Corporate profits rose sharply in the pandemic partly because companies took advantage of shortages to raise prices. Also, stimulus payments to consumers boosted corporate profits because they flowed through from the consumers to the companies they bought stuff from. But most of that is over now. “Once we adjust for fiscal and monetary interventions, the behavior of aggregate profit margins appears much less notable, and by the end of 2022 they are essentially back at their prepandemic levels,” Dino Palazzo, a principal economist for the Federal Reserve in Washington, wrote in a research note last year.
“Although corporate profits indeed contributed to inflation in 2021, their contribution fell in 2022,” according to an economic bulletin by the Federal Reserve Bank of Kansas City last year. An update last year by the lead author, Andrew Glover, found that changes in profits actually subtracted from the rate of inflation in the second and third quarters of 2023.
Biden’s insistence on passing the buck on inflation may be one of the reasons he gets such low marks when it comes to economic leadership. No doubt supply constraints and global shipping woes played a role in igniting inflation, but most Americans know that Biden’s stimulus programs and other deficit spending contributed to inflation. Hearing the president insist otherwise just hurts his credibility.
Perhaps the biggest challenge for Biden’s attempt to sell Americans on Bidenomics is not just that the inflation-inflicted wounds of the last few years are still fresh. It’s that they can remember that things were better when Trump was president. The CBS/YouGov poll found that 65 percent of registered voters say the economy was fairly good or very good under Trump.
Biden ran on the promise of restoring and enhancing prepandemic prosperity. His popularity has struggled and his prospects for a second term have dimmed because that promise has been undermined by inflation.
Convincing Americans otherwise is a tall order—even for a State of the Union address.
