Muddled perceptions of the economy

Published November 30, 2023

By Thomas Mills

Over the Thanksgiving holiday weekend, Joe Biden proved, once again, what a good job he’s doing. All of the people demanding a ceasefire in Gaza will ignore the fact that Biden was central in getting a ceasefire, but he was. He helped bring home hostages, deliver aid to the besieged Gazans, and offered at least a brief respite to relentless bombing and fighting. He also influenced the Israelis to reduce the size of the force that invaded Gaza.

As Washington Post columnist Jennifer Rubin said, “Biden has again managed to outperform expectations. Turns out he understood Netanyahu and the Middle East dynamic much better than the punditocracy and the left wing of his party.”

No president or any other world leader was going to stop Israel from responding quickly and harshly to the vicious and heinous Hamas attack on October 7. Biden, though, understood how to influence the war and, more importantly, how to start focusing on the aftermath. He might not get political credit, but history will look favorably on him.

As I’ve said before, I don’t believe the 2024 election will hinge on foreign policy. It will be determined by a combination of domestic issues including the economy, abortion, immigration, and democracy. Democrats clearly have the edge on abortion and democracy. Republicans have the edge on immigration. The economy, though, is much more muddled.

Social media and political pundits have been obsessing over polls that show Americans believe the country is headed in the wrong direction and that the economy will get worse over the next year. Axios this weekend had a piece titled, “Americans think the American Dream is dying.” They cited a Wall Street Journal poll from late October that shows only 36% of the people believe that the American Dream, defined as “if you work hard you'll get ahead,” is still true and that half believe, “The economic and political systems in the country are stacked against people like me.” These polls paint a picture of a pessimistic populace which could spell doom for leaders like Biden.

However, there’s another picture of America that does not seem to be reflected in these political polls. Virtually anybody who wants to work is working. We’ve had 21 months of unemployment less than 4%, a longer streak than before the pandemic. Wages are up, especially for low income families. According to economist Claudia Sahms, “Wages, after inflation, have risen 4.5% for the lowest wage workers.” Weekly earnings are now above pre-pandemic levels. And, according to Sahms, “The news on consumer spending in this recovery is excellent. The gains have far outpaced inflation. Real consumer spending is nearly back on its pre-Covid trend.”

That’s not the end of the good news. Sahms says, “The labor market recovery has been excellent, and the gains in wealth are stunning. The median family wealth, adjusted for inflation, jumped 37% from 2019 to 2022.” At the same time, debt burden is at an all-time low. People also have more savings than before the pandemic.

The fiscal health of American families is as high as it has been in years. People may have anxiety about the future, but they will vote their pocketbooks today, not take a gamble on changing the status quo. That’s what we saw in the election on November 7.

If the economy is as strong a year from now as it is today, I do not believe people will vote for change, no matter how pessimistic they may feel about the future. Inflation will likely be a thing of the past. Gas prices, which are unpredictable, are heading down right now. Biden might not get credit for the economy, but he’s not going to get punished for it, either. In that sense, Democrats will have an advantage on abortion, democracy, and the economy. Republicans will have an advantage on immigration unless Congress actually does something about it.

A year’s an eternity in political terms and what happens over the next 11-plus months could change the trajectory of the election. Biden’s age may be a factor, but it will be canceled out by Trump’s crazy. Through all the din of the political ads and hot takes on cable news and social media, the small but substantial group of swing voters who heavily influence the outcome of elections, is going to ask themselves, “Am I working?” “Is my job secure?” “Can I pay my bills?” “Am I saving for the future?” If the answer to most of those questions is yes, they are going to see it in their self-interest to maintain the status quo and they will vote for Joe Biden.

On another, slightly related note, a friend of mine who has been very concerned about the state of the election sent me a Powerpoint of a recent NBC poll that had Democrats wetting themselves. The poll has Trump leading Biden by two points and paints a very pessimistic electorate with Biden at his lowest approval yet. And yet one statistic stuck out to me. Among voters over 65-year-old, Biden holds a 12-point advantage over Trump. The pollster focused on Biden’s problems with younger voters, but in 2020, according to Pew, Trump won those older voters by four points. In other words, that’s a 16-point swing among the most reliable voters in the electorate.

As I’ve said before, I’m not putting any stock in polls this far out, but if we’re going to freak out about all of the bad news for Biden, we should acknowledge the good news, too. Younger voters are the most volatile. What they are saying today has little to do with how they will vote and if they vote a year from now. However, those older voters are probably paying a little more attention and are certainly more likely to show up at the ballot box.