Why Biden’s Good Economic News Hasn’t Helped Him Politically — So Far
Americans’ negative views about President Joe Biden’s stewardship of the economy may be the biggest challenge to his reelection. Despite healthy GDP growth and the largest job gains on record over his 35 months in office, the latest Gallup poll found that people disapprove of the president’s handling of the economy by a 67-to-32 percent margin. The latest Morning Consult survey reported that 51 percent don’t trust the president on the economy, compared to 35 percent who did. This broad dissatisfaction reflects the reality that what matters to most voters is their incomes. They are convinced—at least for now–that Biden-era inflation has pulled their incomes down.
While some recent developments in incomes are encouraging, the larger picture explains the dispiriting polls. Before taking account of inflation, Americans’ per capita disposable income—including government transfers (checks for veterans, Social Security checks, and unemployment, for example) but after taxes—has increased by 5.2 percent under Biden, from $57,875 in January 2021 to $60,898 in October 2023. But after adjusting for inflation, per capita disposable income is down by 8.1 percent.
To be sure, two rounds of government stimulus checks sent to most households in the early months of Biden’s term because of the pandemic jacked up people’s incomes. But because they were temporary, people’s incomes fell when the checks stopped.
Here are the facts: In the first four months of Biden’s term, special transfers from Washington to Americans averaged $2.29 trillion per month—compared to less than $750 billion monthly before and after the pandemic checks. Set those payments aside and start the income calculation in September 2021 instead of January, and people’s real disposable incomes under Biden per person through this October didn’t fall at all but rose by nearly 1 percent—despite the two years of high inflation from May 2021 to May 2023. And, according to the IMF, the U.S. average inflation rate of 6.0 percent in 2022 and 2023 was dwarfed by average rates in the same years of 7.4 percent in Italy, 7.5 percent in Germany and Sweden, and 8.4 percent in Great Britain.
Recent developments are quite positive. Under Bidenomics, with annual inflation slowing to 3.2 percent—the Federal Reserve’s target rate is 2 percent–Americans have seen substantial gains in their real disposable incomes over the past year. They’re up 3.3 percent per person from October 2022 to October 2023. But so far, those recent gains haven’t offset the erosion in real incomes when inflation was rising alarmingly.
Comparing Biden’s record to Donald Trump requires some nuance. Over the comparable period in Trump’s term, from January 2017 to October 2019, Americans’ per capita disposable incomes, after inflation, grew about $3,200 or a robust 7.0 percent. Over Trump’s entire term, real per capita disposable income rose 5.4 percent, albeit the first round of pandemic checks were distributed in the spring and early summer of 2020, as Trump’s term was ending, boosting his overall record on incomes.
When we concentrate on wage-and-salary income and set aside government checks, other transfers, taxes, and the capital income of mainly higher-income Americans, the story is also less than ideal for Biden. The average annual wage or salary income of working Americans has declined by $2,500 after inflation or 3.2 percent since Biden took office, compared to inflation-adjusted gains for the comparable period under Trump of about $2,450 or 4.1 percent.
But a deeper look should temper the despair for Democrats. Technical factors explain part of this wage and salary gap. Millions of service workers lost their jobs in the historic economic shutdowns of 2020 and found new employment under Biden in 2021 and 2022. Since the wages of those service workers (think of the hospitality industry, for example) are generally below the national average, their layoffs under Trump increased the 45th’s president’s average, and their subsequent reemployment under Biden pulled down the 46th’s. Alas, for Biden, people care about how much they earn, not how changes in workforce makeup affect a president’s record on average wages and salaries.
Fortunately for Biden, growth matters, too. Since Biden took office, real GDP has increased by 7.2 percent or an annual rate of 2.7 percent, matching the growth rate for the comparable period under Trump. Over Trump’s entire term, however, real GDP grew at an average annual rate of just 1.7 percent, far less than the yearly average under Biden, in part because of the collapse in the economy in the winter and spring of 2020. But based on recent polls showing that voters favor Trump on the economy over Biden, many Americans apparently give the Republican a pass on the GDP crash in the first months of the pandemic, although given his gross mishandling of the pandemic, he certainly didn’t earn that pass.
Jobs also matter, and here, Biden’s record is stellar. Since he took office, nearly 14 million unemployed Americans have found jobs. This is unprecedented, stunning job growth, averaging more than 5.2 million net new jobs per year. Trump’s jobs record can’t touch Biden’s, with gains averaging 2.2 million jobs per year for the comparable period—far less than half of Biden’s. Over Trump’s four-year term, net employment fell by 3.2 million jobs, the worst record since Herbert Hoover.
For Biden, elections under recent presidents suggest that incomes matter more than jobs or growth. George W. Bush was reelected in 2004 with modest GDP gains and a net decline in employment—but 5.6 percent growth in real per capita disposable income. Similarly, Barack Obama won his second term in 2012 with even slower growth—net employment gains totaling just 600,000 jobs over four years—and real disposable income growth of 2.6 percent.
Biden has not received credit—not yet anyway—for the recent substantial income progress and the sharp decline in inflation over the past year. It’s understandable—when times are bad and then improve, it takes most people time to trust that the better times aren’t ephemeral. Plus, since there hadn’t been serious inflation in the U.S. for 40 years, many Americans had their first sour taste of its effects under Biden.
Fortunately for the president and Democrats going into the 2024 elections, today’s positive trends seem more likely to persist than to be derailed by some external development like a widening of the Israel-Gaza war. That’s because Biden’s gains rest on fundamentals of what’s happening in the economy, especially the past year’s healthy growth and impressive productivity gains, which are more important than most shocks from abroad. It’s critical that the good times persist because Biden’s shot at a second term—and his best chance for a sizable victory—likely rests on Americans concluding that favorable economic times will continue. If Trump is the GOP nominee, Democrats will likely be boosted by his legal woes and authoritarian fulminating as well as the Dobbs ruling. But continued solid economic performance–based on two years of rising incomes and falling inflation right up to election day—will also be crucial.
This essay appeared originally in Washington Monthly