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During a recent health check-up, I had a memorable conversation with an African-American nurse. Surprisingly, she expressed her intention to vote for Donald Trump in the upcoming elections because she felt more financially secure during his presidency. When asked about the future of US democracy, she admitted that she didn’t have much time to contemplate it. Similarly, she didn’t feel the impact of Joe Biden’s economic reforms.
While personal anecdotes can be misleading, there is data to support the nurse’s perspective. Under Trump, blue-collar wage growth in the US outpaced inflation for the first time in years. Conversely, under Biden, these wages have declined in real terms. This explains why only a third of Americans approve of Biden’s economic performance and why even fewer African-Americans believe his policies have benefited their community.
If the assessment of a president’s actions during challenging times influenced future prospects, Biden’s chances for the 2024 elections would be more favorable. He assumed office during the height of the pandemic, which severely disrupted global supply chains and had a detrimental impact on the economy. Despite these obstacles, the United States has outperformed other nations in its recovery from Covid-19.
Currently, US unemployment stands at a near 50-year low, with only 3.6% of the workforce unemployed. The American economy has grown by around 10% since Biden took office two and a half years ago, and inflation is decreasing at a faster rate compared to other countries. There is a possibility that the US is heading towards a period of sustained low inflation, which is typically challenging to achieve.
However, a significant disparity exists between the impressive macroeconomic situation in the US and the sentiments of the majority of Americans. Furthermore, there is little Biden can do to bridge this gap in the 15 months leading up to the elections. The US Federal Reserve holds the decision-making power, and it is likely to raise interest rates for the 11th time in 12 meetings. This further complicates matters as mortgage costs become unaffordable for many individuals, and inflation becomes a top concern for voters. The only beneficiaries seem to be those with exposure to the stock market, which has experienced an unexpectedly sharp rebound this year. The overall sentiment among voters will play a crucial role in determining the outcome of the elections.
Biden’s strategy comprises two key elements. Firstly, he aims to promote “Bidenomics” to the electorate. This comprehensive approach includes ambitious Democratic reforms, such as significant investment in infrastructure, a transition to green energy, incentives to bring semiconductor plants back to the US, price controls on prescription drugs, and an overhaul of the Internal Revenue Service to ensure the wealthy pay their fair share in taxes.
Effective political messaging aligns with reality, and Bidenomics holds the potential to enhance middle-class income growth in the future. However, the speed at which this future becomes a reality is largely beyond Biden’s control.
This brings us to the second part of Biden’s strategy — luck. Economists failed to anticipate inflation’s impact on the post-pandemic economy, indicating uncertainty in predicting future outcomes accurately. Biden hopes that inflation will continue to decrease without causing job losses. If wages surpass inflation and consumers begin to experience the benefits, his approval rating will likely rise.
Conversely, it is equally possible that economic growth will slow in the next year, even without a recession. Monetary policy operates with a time lag, and the Federal Reserve may continue to tighten policy. In such a scenario, Biden would face challenges in securing re-election in 2024, even if his opponent were Trump.
There are two areas where Biden could have made better decisions. Firstly, his initial stimulus package of $1.9 trillion after taking office likely contributed to inflation. Although he cannot rectify this now, he could address the second area by reversing Trump’s tariffs on imports like steel and aluminum, which would have a significant impact on reducing inflation.
The American elite are rightfully concerned about the threat Trump poses to democracy. However, blue-collar voters from all ethnic backgrounds also share worries about their financial well-being. The worst scenario for Biden would be forcing voters to choose between their economic interests and their personal beliefs. While it may be accurate to claim that Trump would harm the economy and more, this narrative does not resonate with everyone’s personal experiences.
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