President Joe Biden’s speech earlier this month told Americans that they have a mistaken view of the economy. Although the average of polls shows that only some 38.3 percent of American voters have confidence in the president’s handling of the economy, the president thinks he’s doing a great job, and his speech aimed to assure America of that fact. Not only did he insist that things are looking up, but he also assured all that things will get much better once his policies have a chance to take effect. The talk was clearly aimed at the 2024 election. However, economic prospects leave little likelihood that the message will gain acceptance.
He'll have to work harder than one speech to convince Americans. His approval figures on economics have deteriorated consistently since he took office. In March 2021, just after the second COVID-19 pandemic relief bill became law, some 60 percent of American adults thought the president was doing a good job, generally. That was the high point. Soon thereafter, as signs of inflation began to emerge, his approval ratings began to fall, and they’ve done so consistently since, down to recent lows.
Despite this less-than-encouraging backdrop, Mr. Biden took full ownership of his administration’s economic stewardship. Referring to his approach as “Bidenomics,” the president made four arguments. The first focused on the still-strong jobs market. In June, payrolls grew by 209,000 after an even stronger May figure of 306,000. Unemployment, although up from its lows to 3.6 percent of the workforce, remained remarkably low by historical standards. The speech’s second part used the upbeat jobs theme to point out how the economy has avoided the recession once widely anticipated when the Federal Reserve began its anti-inflationary interest rate hikes.
The speech’s third section turned on less firm footing. The president clung to the fact that inflation has slowed dramatically from the highs of a year ago. At an annual rate of 4 percent, inflation is less than half what it was in June 2022. He implied that the improvement would continue, but he offered no reason why it should. In a similar way, Mr. Biden, in the final part of the speech, promised vast economic improvements. He touted his policy of targeting certain investments to drive the economy forward, comparing these policies favorably with tax cuts. He gave as evidence last year’s bipartisan infrastructure bill and his legislation to subsidize the domestic manufacture of semiconductors and the recently announced $40 billion to bring high-speed internet to the entire country. These steps, he forecast, will pay great dividends, although he admitted that the effects will take time to materialize.
For all this, the president failed to mention other economic indicators and different economic perspectives that, despite the speech’s upbeat framing, might explain his low economics approval rating. A crucial negative that Americans can’t help but note is the state of real wages. Weekly and hourly paychecks have increased, but they’ve failed to keep up with inflation. Hourly earnings after the effects of inflation have declined by more than 3 percent since he took office.
If the speech is an early glimpse at the 2024 election campaign—and that’s certainly what it looks like—Mr. Biden has taken a high-risk strategy. The election, after all, is 16 months away. For his economic perspective to gain traction, the economy will have to improve visibly over the intervening months. But the Federal Reserve is determined to raise interest rates in coming months and at the very least keep them high until inflation retreats to the preferred 2 percent rate, half of today’s ongoing rate. That policy posture promises high and possibly rising rates for quite some time yet, a practice that if it doesn’t guarantee recession hardly points to an economic pickup. The president also has effectively promised continued improvements in inflation. But history shows that inflation typically follows a variegated path and will almost surely show signs of worsening at some point during this time. And wages aren’t likely to catch up to inflation anytime soon. Things could, of course, work out, but the likelihoods still suggest that economic conditions will deteriorate before they improve.
