President Joe Biden goes into next year\u2019s election with a vexing challenge: Just as the US economy is getting stronger, people are still feeling horrible about it. Pollsters and economists say there has never been as wide a gap between the underlying health of the economy and public perception. The divergence could be a decisive factor in whether the Democrat secures a second term next year. Republicans are seizing on the dissatisfaction to skewer Biden, while the White House is finding less success as it tries to highlight economic progress.<\/p>\n
\u201cThings are getting better and people think things are going to get worse \u2013 and that\u2019s the most dangerous piece of this,\u201d said Democratic pollster Celinda Lake, who has worked with Biden. Lake said voters no longer want to just see inflation rates fall \u2013 rather, they want an outright decline in prices, something that last happened on a large scale during the Great Depression. \u201cHonestly, I\u2019m kind of mystified by it,\u201d she said. By many measures, the US economy is rock solid. Friday\u2019s employment report showed that employers added 199,000 jobs in November and the unemployment rate dropped to 3.7 per cent.<\/p>\n
Inflation has plummeted in little over a year from a troubling 9.1 per cent to 3.2 per cent without causing a recession \u2013 a phenomenon that some once sceptical economists have dubbed \u201cimmaculate\u201d. Yet people remain dejected about the economy, according to the University of Michigan\u2019s Index of Consumer Sentiment. The preliminary December figures issued on Friday showed a jump in sentiment as people seem to recognise that inflation is cooling. But the index is still slightly below its July level.<\/p>\n
In a possible warning sign for Biden, people surveyed for the index brought up the 2024 election. Sentiment rose dramatically more among Republicans than Democrats, potentially suggesting that GOP voters became more optimistic about winning back the White House. \u201cConsumers have been feeling broadly uneasy about the economy since the pandemic, and they are still coming to grips with the notion that we are not returning to the pre-pandemic normal,'\u201d Joanne Hsu, director and chief economist of the survey, said of the overall trend in recent months.<\/p>\n
Jared Bernstein, chair of the White House Council of Economic Advisers, stressed that a strong underlying economy is \u201cabsolutely necessary\u201d to eventually lifting consumer sentiment. His argument is that as the economy continues to improve, more people will recognise the benefits and sentiment will improve. \u201cWe\u2019ve got to keep fighting to lower costs and build on the progress that we\u2019ve made,\u201d Bernstein said. \u201cWe just need more time to get these gains to working Americans \u2013 that\u2019s our plan.\u201d The White House has made three major shifts in its messaging in hopes of building up confidence in Biden\u2019s economic leadership. The president this summer began to pepper his speeches with the term \u201cBidenomics\u201d to describe his policies, only to have Republicans latch onto the word as a point of attack.<\/p>\n
White House officials have pointed out specific items for which prices have fallen outright. They noted lower prices for turkeys during Thanksgiving as well as for eggs. Biden repeatedly emphasises that he lowered insulin costs for Medicare participants, while other officials discuss how gasoline prices have dropped from their peak. Second, Biden recently started to blame inflation on corporations that hiked prices when they saw an opportunity to improve their profits, bringing more prominence to an argument first used when gasoline prices spiked. The president\u2019s argument is suspicious to many economists, yet the intended message to voters is that Biden is fighting for them against those he blames for fuelling inflation.<\/p>\n
\u201cLet me be clear: Any corporation that is not passing these savings on to the consumers needs to stop their price gouging,\u201d Biden said recently in Pueblo, Colorado. \u201cThe American people are tired of being played for suckers.\u201d And Biden is now going after the track record of former President Donald Trump, the current GOP front-runner. Biden\u2019s campaign sent out a statement after Friday\u2019s employment report that said: \u201cDespite his claims of being a jobs president, Donald Trump had the worst jobs record since the Great Depression, losing nearly three million jobs.\u201d The Republican counter to Biden has been to dismiss the positive economic data and focus on how voters are feeling. As the annual inflation rate has fallen, GOP messaging has focused instead on multi-year increases in consumer prices without necessarily factoring in wage gains. And Republican lawmakers have argued that people should trust their gut on the economy instead of the statistics cited by Biden.<\/p>\n
\u201cJoe Biden\u2019s message to them is just this: He says don\u2019t believe your lying eyes,\u201d Sen. John Barrasso, R-Wyoming, said in a recent floor speech. Biden\u2019s speeches over the past two years has done little to improve his anemic polling on the economy. Administration officials had once assumed that better economic numbers would overcome any doubts among voters, only to find that the negativity stayed even as the US economy became likely to avoid a recession once forecasted by economists. Claudia Sahm, a former Federal Reserve economist, has been surprised by the anger generated online when she has noted the signs of a strong economy.<\/p>\n
A typical US household is better off than it was in 2020. Inequality has lessened somewhat in recent years as wage growth has favoured poorer workers. Yet people still seem rattled and disconnected by the shock of the pandemic, the arrival of government aid and the inflation that followed as hiring improved. \u201cPeople have really been jerked around,\u201d Sahm said. \u201cThings have been turned on and off. Everything has moved fast. It\u2019s been disruptive and confusing. We\u2019re just tired.\u201d There is no solitary cause for this gap between the major data and public feeling. But the experts trying to make sense of things have multiple theories about what\u2019s going on. Besides the pandemic\u2019s impact, it\u2019s possible that social media has distorted how people feel about the economy as they watch the posh lifestyles of influencers. Many people also judge the economy based on their own political beliefs, rather than the underlying numbers.<\/p>\n
It could simply be that people need time to adjust after a period of rising inflation. As a result, there\u2019s a lag before a slowing rate of inflation boosts how consumers feel, according to a recent analysis by the economists Ryan Cummings and Neale Mahoney. \u201cSentiment is still being weighed down by the high inflation we had last year,\u201d Cummings said. \u201cAs that recedes further into the rearview mirror, its effects are likely to diminish.\u201d Another possibility is that the loss of pandemic aid from the government left people materially poorer. Millions of households got checks from the government and an expanded child tax credit deposited directly into their accounts. Republicans blamed this funding for feeding inflation, but the money also initially helped to shelter people from the pain of rising prices.<\/p>\n
Adjusting for government transfers and taxes, the average annual income for someone in the lower half of earners was USD 34,800 when Biden took office, according to an analysis provided by Gabriel Zucman, an economist at the University of California, Berkeley. That average fell to USD 26,100 by March 2023 in a sign that wage growth could not make up for the loss of government aid. Samuel Rines, an investment strategist at Corbu, found that companies including Pepsi, Kraft-Heinz, Procter and Gamble and Kimberly-Clark latched onto the higher food and energy prices after Russia\u2019s 2022 invasion of Ukraine to boost their own products\u2019 prices and increase profits.<\/p>\n
Earnings reports suggest that consumers started to tire of some companies\u2019 double-digit price increases this summer, prompting those companies to indicate that future prices increases will be closer to the historic average of 2 per cent. Biden can reasonably argue that companies took advantage of the war in Ukraine and the pandemic to raise their prices, Rines said. But the increases happened 12 to 18 months ago and Biden\u2019s current argument doesn\u2019t apply to what businesses are doing now. Rines said of the president\u2019s message on price gouging: \u201cIt\u2019s pretty much 18 months too late.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
President Joe Biden goes into next year\u2019s election with a vexing challenge: Just as the US economy is getting stronger,\u2026<\/p>\n","protected":false},"author":28,"featured_media":5226,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[4797,3642,299,168,1050,359,4796,101,4798,4794,265,4795,3530,360],"class_list":["post-16639","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-corporations","tag-crisis","tag-democrats","tag-donald-trump","tag-gop","tag-inflation","tag-job-creation","tag-joe-biden","tag-price-gouging","tag-reduction","tag-russia-ukraine-war","tag-strong-economy","tag-us-2024-presidential-elections","tag-us-economy"],"reading_time":"7 min read","_links":{"self":[{"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/posts\/16639","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/users\/28"}],"replies":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/comments?post=16639"}],"version-history":[{"count":0,"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/posts\/16639\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/media\/5226"}],"wp:attachment":[{"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/media?parent=16639"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/categories?post=16639"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.businessupturn.com\/usa\/wp-json\/wp\/v2\/tags?post=16639"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}