Competing versions of the economy - and the campaign

Published January 17, 2024

By Thomas Mills

Right now, two versions of the economy are competing for attention. One is the story of a strong recovery and a soft landing from the transitory inflation caused by the pandemic. The other is of a nation struggling under crushing price increases that render wage growth meaningless and lead to more personal debt.

To hear Republicans tell it, our economy is in the toilet. One conservative friend told me that 2024 reminds him of 1980 when stagflation brought down Jimmy Carter. He sent me a graph showing that employment has not reached pre-pandemic levels, but the data was a year old. Other Republicans justify their support for Donald Trump by criticizing “what Joe Biden has done to the country” without specifying anything. They hang onto polls that show most Americans say the country is headed in the wrong direction, have a pessimistic view of the economy, and blame Joe Biden.

Democrats, Joe Biden in particular, focus on rapid job growth and a steadily expanding economy. They claim that wages are rising faster than inflation which has largely been defeated. Employment has been below 4% for the longest stretch in more than 50 years. They tout Bidenomics and the so-called “soft landing” from inflation, defying the expectations of a recession that many economists predicted last year.

For months, Democrats have blamed media reporting for the negative views that Republicans savor. They claim stories of inflation and economic despair outstrip stories of a strong and sustained recovery. Other analysts believe people are really struggling and that the economy is not as good Democrats would like us to believe. Inflation really is still hurting households.

I think there’s truth in both stories. Inflation really does stick with people. Prices have risen substantially and those increases are in our faces every time we go into a grocery store. Whenever I pay $2.99 for that quart of half-and-half, I remember that it was only $1.89 not too long ago. But I also believe people are starting to feel better about the economy and their future and the media has done a lousy job of reporting that.

According to a report by Axios this morning, 63% of Americans say their financial situation is good, including 19% who say it’s very good. They are also optimistic, with 66% believing 2024 will be better than 2023. These numbers are very good for Biden’s prospects this fall.

I believe that most elections are determined by people’s perceptions of their personal situations. If they feel good about their finances and secure in their jobs, they are probably going to vote for the status quo. I also believe perceptions lag reality. The economy has been going well for months, but that fact is just starting to sink in. After years of pandemic angst, people are finally beginning to have confidence that they aren’t about to be thrust back into uncertainty.

Despite Republican fever dreams of a torched economic landscape, the economy favors Democrats as the election year kicks off in earnest. Not many people are predicting a recession anymore. Inflation is very close to the Fed’s target of 2%, year over year, and they are likely to cut interest rates early this year. Gas prices are decreasing, a trend GasBuddy predicts will continue through 2024. By next fall, all of this reality will have sunk in.

Issues beyond the economy also favor Democrats. While the GOP will focus relentlessly on border and immigration, abortion will likely have a more direct impact on the election. People for whom immigration is a top priority are already planning to vote Republican, but women who might otherwise be conservative also want to protect their right to self determination. Abortion will also push more young people out to polls than immigration. Abortion is both a motivator and wedge issue.

I don’t believe the election is going to be heavily influenced by the war in Gaza or the Houthis in the Red Sea. The heavy focus on the Middle East is already beginning to wane. Sure, protests will continue, but they will likely alienate people rather than galvanize them. Stopping traffic and protesting in front of cancer wards is not winning any supporters in middle America. Short of sending troops into battle or a terrorist attack, I don’t think foreign policy will play a decisive role in the election.

Finally, Democrats have been outperforming Republicans in special elections all year while Republicans seem to be having trouble motivating their people. In a special election for state legislature in Florida yesterday, Democrats flipped a GOP seat. The Republican Iowa caucuses on Monday was down 75,000 people from 2016, the last time Trump was challenged. In addition, Trump only garnered 51% of the vote and polls show a substantial number of Nikki Haley supporters say they won’t support Trump.

Regardless of what polls say today, the political environment is better for Joe Biden than Donald Trump. The GOP narrative of a struggling economy is just wishful thinking. People are increasingly feeling better about their financial situations and the economy is getting better, not worse. Inflation is largely stable and gas prices are going down. Of non-economic issues, abortion seems to be more of a driver than wars in the Middle East or problems along the border. Democrats keeping winning special elections, indicating a more motivated base than Republicans. The election will be very close and the next eleven months will be ugly, but, right now, I’d rather be Biden than Trump.