Will US voters believe they are better off with Biden?

Deep in rural Minnesota, surrounded by fields of corn and soyabeans, Joe Biden tried to explain the phrase he hopes will kick start his bid for re-election next year.

“Folks, ‘Bidenomics’ is just another way of saying the American dream,” he said last week at a farm in Northfield. 

One year out from an election that many analysts believe could be a defining moment in the country’s history, Biden is persistently behind in the polls and under growing pressure within his party. Over the weekend David Axelrod, who was chief strategist for Barack Obama’s presidential campaigns, suggested it might not be “wise” for Biden to even run in 2024, in part because of his age. 

Yet Biden is still pressing ahead with a re-election bid and is betting everything on his personal economic blueprint. In recent months, he has embraced the term Bidenomics to promote his ambitious agenda, which is rooted in trillions of dollars’ worth of public investments, a focus on middle-income workers and an aggressive approach to competition policy. 

Biden insists his policies represent a decisive break from 40 years of “trickle-down economics [which] limited the dream to those at the top”. A new $25mn advertising blitz in key battleground states tries to drive home the point. “Today, inflation is down. Unemployment the lowest in decades. There is more to do, but President Biden is getting results that matter,” the narrator says.

But worryingly for Biden and his Democratic party, voters remain overwhelmingly downbeat on the US economy — and place the blame squarely on him. Even if the US is doing better than most of its peer economies, ordinary Americans do not feel that way about their living standards.

That leaves Biden vulnerable to attacks from Republicans, who relentlessly accuse him of leaving Americans worse off. For them, Bidenomics is synonymous with acute sticker shock on food and other everyday necessities as inflation remains historically high post-pandemic. 

“Bidenomics has made everything more expensive for Minnesota farmers, workers, and families,” the Republican National Committee said ahead of the president’s trip to the Midwestern state. “As the cost of farmland and diesel continues to surge, Biden’s policies are crushing those who feed America.” 

Opinion polling suggests the attacks are working — putting the president on shaky political ground heading into an election year. 

“The economy perhaps matters less than it used to in determining the outcome of national elections, but for many people, the kitchen table issues, the bread and butter issues, those are still extremely important,” says Maxwell Shulman, a non-partisan policy analyst at Beacon Policy Advisors.

A poll from the Associated Press and NORC at the University of Chicago last month showed that nearly three in four American adults describe the national economy as poor. About two-thirds said their household expenses had risen over the past year, and only a quarter said their incomes had increased during the same period.

Most worryingly for Biden, a New York Times/Siena poll, published this week, found that just 19 per cent of voters in the battleground states that are likely to determine the outcome of next year’s presidential election — Arizona, Georgia, Michigan, Nevada, Pennsylvania and Wisconsin — said economic conditions were “good” or “excellent”.

Just 37 per cent of those in swing states said they trusted Biden over his likely Republican opponent, Donald Trump, to do a better job on the economy.

“The numbers are so bad and cannot be explained merely by [partisanship],” adds Shulman of recent polling. “It seems like a lot of independents, a lot of moderates, and even . . . Democrats do not believe the economy is going well.”

Democrats hope that good economic news will eventually feed through to sentiment — and that the campaign will give Biden a chance to explain what he has done for voters.

But so far, the pitch about Bidenomics does not seem to be cutting through. Many voters in battleground states across the country admit they do not know much about his economic policies and question what the White House is doing to help them and their families.

“I don’t really understand where he is coming from with the whole Bidenomics thing,” says Rhonda Gurney, a gift shop owner in Sunapee, New Hampshire, whose small business is weighed down with higher shipping and energy costs. “What are the policies that are being pointed to?”

‘Defying the naysayers’

Most governments in wealthy countries around the world are looking at America’s recent economic data with envy.

Inflation is down from last year’s annual peak of 9.1 per cent, with the latest figures from the Bureau of Labor Statistics showing the consumer price index rose 3.7 per cent in September compared with the same time last year.

Core inflation, which strips out volatile food and energy prices, was 4.1 per cent on a year-on-year basis, down from 6.6 per cent in September 2022.

For the bulk of his administration, the jobs market has also boomed. Americans seeking work have not only been able to secure employment with relative ease but also jockey for higher pay in the process. The pace of monthly job gains has steadily declined over the past year and in October slowed further, according to data released last week. The unemployment rate has only now started to creep up from multi-decade lows and currently hovers at 3.9 per cent.

Partly as a result of generous fiscal support during the pandemic, consumers have spent in droves, fuelling strong economic growth that has proved more resilient than expected under the weight of sharply higher borrowing costs imposed by the Federal Reserve.

Despite interest rates in excess of 5 per cent, the US economy last quarter expanded at a blistering annualised pace of 4.9 per cent. While policymakers and economists expect it to moderate from here, growth has defied the worst prognoses so far.

“A year ago, the consensus view was that unemployment would need to go up to 4.5 per cent and the economy would need to stall out in order to get inflation down to where it is today,” Lael Brainard, director of Biden’s National Economic Council, told reporters last month.

“It turns out that was wrong,” Brainard added. “US growth has been much stronger than the naysayers believed, unemployment has remained below 4 per cent this entire time, but inflation has actually fallen in line with that forecast.”

Those statistics have fuelled hope that a painful recession can be avoided next year. “What we have looks like a soft landing with very good outcomes for the US economy,” Treasury secretary Janet Yellen predicted in October.

But part of the problem for Biden is that even as Americans’ paychecks swelled, those gains since 2021 did not keep up with inflation until this summer — putting a big squeeze on household budgets.

At the same time, the level of consumer prices still remains elevated for many goods and services, even though the speed of those increases has broadly slowed.

“Even though the price of milk now is not changing, dorky economists like me will say, ‘Don’t you understand? That is the difference between a level and a percentage change.’ And that is why people get so frustrated with economists,” says Seth Carpenter, a former Treasury and Fed official now at Morgan Stanley.

Expensive milk, eggs and other grocery items are top of mind for many voters across the country when they talk about price pressures — and how they feel about the broader economy.

“The economy sucks right now,” said Avonti Fonville, a Ford worker in Wayne, Michigan, from the picket line before his union, the United Auto Workers, struck a deal with the automaker last month.

“The cost of food has tripled since last year and that just makes it hard,” Fonville added, pointing to prices for eggs and meat in particular. “It’s hard to even live right now. Going to the grocery store is a mortgage.”

A colleague also on strike shared the same sentiment. “Ever since [Biden] took office, inflation has gone up,” said John Bugeja, adding that feeding his own family was costing “at least another $100, $150 bucks a week”.

That pressure is being felt across the country. Wyatt Bradford, the general manager of a gift shop and gallery in Jackson Hole, in the north-west state of Wyoming, says for his family of four, average weekly grocery bills are topping $200, about $50 higher than it was three or four years ago.

“We’re definitely going out a lot less than we used to,” he adds.

Compared with September 2022, food costs are up nearly 4 per cent, with some of the biggest increases seen in meat, bread and bakery items. Egg prices have actually fallen nearly 15 per cent on an annual basis, according to the latest CPI report, but Americans are still having to shell out more for a dozen than they did several years ago.

The same is true for milk, although recent relief has been far more subdued. Prices are down roughly 2 per cent on a year-over-year basis, but remain well in excess of what Americans were paying for the product prior to the pandemic.

Americans going out to eat face even bigger bills, with prices on the whole up 6 per cent compared with the same time last year.

The White House and Biden’s allies acknowledge that many Americans are still feeling the strains of high inflation, even if the pace of price increases has slowed on a monthly basis.

And analysts point out that voters’ perceptions of the economy can be a lagging indicator, and therefore reflect the actual state of the economy several months ago, rather than at present.

“People can’t really see what the economy is doing for them right now, but they can see what the economy has done for them the last three months, or the last six months,” says Shulman. “Insofar as things are getting better, that necessarily implies that things were worse.”

Francesco D’Acunto, an economist at Georgetown University who studies the beliefs and financial decision-making of households, says individuals have a “very biased memory about what prices were in the past” and can often overestimate the amount prices have increased over time.

“They think inflation is higher than what it really is, because they tend to recall lower prices for the last year than they were actually paying,” he adds.

He believes that most individuals do not understand that slowing inflation does not mean falling prices — and that deflation would almost certainly correspond with a far more damaging economic downturn.

If prices go down, D’Acunto adds, “that would have very bad implications for [consumers] in many respects. They would be much more likely to lose their jobs; they would be much more likely to have their wages cut.”

The White House is hopeful that voters will soon see the benefits of the administration’s policies. “People want their old prices back — they want deflation, not disinflation,” says Jared Bernstein, who chairs the president’s Council of Economic Advisers.

But Bernstein adds that “purchasing power has gone up” because the job market has remained strong while inflation has eased. “People are able to buy a similar amount groceries, for example, for an hour of work as they did before the pandemic. That’s real progress, but it’s something Americans need to see for more than a few months to feel better about.”

Selling the benefits

Communicating their economic successes will be key for Biden and the Democrats as they head into an election year.

Many of them say that must start with acknowledging the price pressures families are facing, while emphasising the tangible benefits of Biden’s legislative achievements, many of which have healthy support.

A Navigator poll conducted by Democratic pollsters Global Strategy Group and GBAO last month found that Biden’s flagship policies — including a move to lower the cost of certain prescription drugs for seniors on Medicare, and the $1.2tn bipartisan infrastructure law that invested billions in rebuilding bridges and roads and expanding broadband access — were “strongly supported” or “somewhat supported” by about three-quarters of registered voters, including more than half of Republicans.

This is the message that Biden allies say needs to be hammered home. “The only thing you can do is make sure that you communicate your legislative victories that are helping this economy each and every day,” says Robert Wolf, a big Democratic donor and the former chair and chief executive of UBS Americas. “They need to do more of that . . . they need to communicate how this impacts each American wherever that project is happening.”

“You have to continue to talk about inflation coming down and wages doing better, right?” Wolf adds. “If purchasing power is better, people should feel like they’re doing better. We have to get that out more.”

Nancy Pelosi, the former Democratic Speaker of the House, has acknowledged that the cost of living is a “challenge” for the president as he gears up for a re-election campaign.

But speaking at an event in Washington last week, she was confident that clearly demonstrating what Biden has delivered — and what he would do with another four years in office — could win over voters. “I think the messaging has to be very clear about what he has done, what it means and what we have left to do,” she added.

That may well prove to be the case. The Navigator poll showed that Biden’s approval rating improved by double digits, including by a sizeable 20 points among independents, when voters were told about his economic policies.

“We know that when people are informed, the appraisal of Biden goes up,” says Democratic strategist Simon Rosenberg. “That is what campaigns are for. I think we will be successful at being able to tell our story.”

There are other moving parts that could work in Biden’s favour, particularly in an expected rematch with Trump. While economic sentiment will be a “major issue” in next year’s election, argues Rosenberg, voter concerns about Trump, who is fighting a series of legal battles, are likely to outweigh any malaise about the cost of living, pointing to last year’s midterm elections when Democrats outperformed expectations despite poor polling numbers and high inflation.

“There is something that has been more powerful than disappointment in Joe Biden in our politics, which has been fear of the extremism in the Republican party,” adds Rosenberg. “That has really been the driving force in the last three elections and is likely to be next year as well.”

Analysts point out that with one year to go many voters are not yet thinking much about the 2024 election, which means the public focus remains on Biden. “The prospect of a Trump presidency is a lot more remote than voters feeling the pinch right now,” says Shulman from Beacon Policy Advisors.

“But as the election draws nearer, and people go into their camps and the alternative starts to rise . . . I think that will change how people view Bidenomics and their views of the economy in general.”

Additional reporting by Alex Rogers in Sunapee, New Hampshire, Claire Bushey in Wayne, Michigan, and James Politi in Washington

Data visualisation by Eva Xiao and Oliver Roeder

Source: Economy - ft.com