The Daily - The Economy is on an Upswing. Should Biden Get Credit for It?

Episode Date: August 7, 2023

The latest economic figures are some of the best of President Biden’s tenure so far. It appears increasingly likely that the United States has managed to tame high inflation without causing a recession.Jim Tankersley, who covers economic policy for The Times, discusses the encouraging outlook and speculates about why the positive data hasn’t translated into a bump in President Biden’s popularity.Guest: Jim Tankersley, a White House correspondent for The New York Times.Background reading: For President Biden, many of the numbers that define an administration — on the economy, crime, immigration — are finally heading in the right direction. Except one: his approval rating.With the strong numbers, there are tentative signs that the national mood is beginning to improve.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.

From The New York Times, I'm Sabrina Tavernisi, and this is The Daily. After months of worry about a possible recession, it is now looking increasingly likely that the U.S. has managed to avoid one. Today, I talked to my colleague, Jim Tankersley, about that brighter economic picture, and about why, at least so far, Americans aren't giving President Biden much credit for it. It's Monday, August 7th. So, Jim, we've talked a bunch on the show about the economy and about how the government's been trying to thread a needle, right? Fighting inflation, on the one hand, while avoiding sending the economy into a recession on the other.

And when we had you on the show last year, you talked about this and you said there were two potential outcomes. One was the U.S. would experience a soft landing, which, as the name suggests, is kind of pillowy and painless. Or the U.S. would experience a hard landing, which is a recession with lots of job loss and pain. Where are we today in the government's threading of that needle? Well, I think let's be really direct about it. We are in the midst of some of the best economic data, if not the best economic data, of Joe Biden's presidency. And those data are giving a lot of economists and forecasters more and more confidence that they

might pull this soft landing thing off, that it just might come to pass that the economy is able to make it out of high inflation without falling back into a recession and do so in a way that really starts to deliver the kinds of outcomes for workers that President Biden's been wanting to do all along. So tell us about that data. What are you seeing? We're seeing a bunch of things that are encouraging. The first is on growth. The economy keeps growing and adding jobs faster than economists predicted. So in the second quarter this year, the economy expanded at a 2.4% annual rate. That was way better than most economists thought it would be.

At the same time, the job market just continues to churn on. Month after month, we are seeing hundreds of thousands of jobs being added to the economy, despite the fact that forecasters keep waiting for that to slow down, despite the fact that President Biden himself has been waiting for that to slow down. It is slowing down, but very gradually. And that growth, the combination of job growth and economic growth, is really powering the economy forward. At the same time, and I think this is the most encouraging thing to people who are out shopping right now, or if you're the president, to his advisors, is the fact that inflation is coming down. A year ago, we had like 7% annual inflation

by one measure, and now it's 3%. This is way better than I think a lot of economists thought we could pull off with those continued growth rates that I mentioned. And one more really important thing, really great sign for the economy is that people's standard of living is starting to improve in a way that it hadn't at the first couple of years of the Biden presidency. Hourly wages rose faster than prices did in the spring for the first time in two years, which just means people have more money to spend. Their incomes are actually going up, even in inflation-adjusted terms. That's really good news. And that's the sort of thing that the president's team has been looking for for a long time. Now, big caveat. All of this could change.

Growth could slow. Job growth could slow. And it could slow quite abruptly. Inflation could spike again. There are all sorts of reasons why economists in and outside of the administration caution we're not out of the woods yet. The plane has not fully soft landed. But with that caveat there, it's looking better for that soft landing story now than it has at any point in the last couple of years. Caveats notwithstanding, this seems like very, very good news, right? I mean, it wasn't at all a foregone conclusion that we would be here at this point. So what's responsible for this upturn? I mean, what strategies deserve credit?

Well, I'm not a pilot, so I'm not going to be able to pull off a complete airplane metaphor here as we land this. And I said, I want to talk about it kind of in terms of a car. Okay. So think about landing your car. Just go with me. I'm following. I'm following. I got you. Okay. So what has to happen to pull off the sort of outcome we're looking at here, which is no recession, but bringing inflation down, is you need to have an engine, a motor, something driving the growth in the economy that we continue to see, while at the same time, a brake, something that's bringing down prices, that stubbornly high inflation that hit 40-year highs a year ago. You need to be reducing that while still moving the economy forward. And there are policies that have been

doing both these things. So let's separate them out. President Biden started pouring fuel into the motor, if you will, with the stimulus bill he signed in 2021. It was $1.9 trillion, the American Rescue Plan. He gave money to people and to businesses and to state and local governments. And that money fed through to more consumer spending and more hiring and just sort of a very quick return to low unemployment. There's another thing, though, that Biden did, and it's actually a bunch of things. It's a bunch

of bills that he signed after the stimulus. The infrastructure bill, the semiconductor chips bill, both of which were bipartisan, and then the Inflation Reduction Act, which he signed a year ago, which is a climate bill, basically clean energy. All three of those bills have caused a bunch of investment in the economy, government investment and private investment in building things. And that's part of the motor, too. We have seen a big uptick in manufacturing construction, the building of new factories and new roads and things. And that's helping, too. So I think that suite of policies that Biden signed into law has helped with the motor a lot on the economy. But the tricky thing here is that those efforts were also contributing in some way to inflation.

All this money pouring into the economy was adding to the price hikes we've been seeing. And so that's what makes the brakes so important as a complement to the motor, to bring down inflation. And that largely has been the Federal Reserve. The Federal Reserve has been raising interest rates, that has been reducing some economic activity, reducing lending, making credit much, much tighter. And that has had the effect of bringing down inflation rather quickly. Now, some other things have too. For example, oil prices spiked after Russia invaded Ukraine, but they've come down since then, and that's helped with inflation. Supply chains

have kind of healed themselves a bit, which were clogged after the pandemic. That's helped with inflation. But the big thing, most economists would say, the big break is the Federal Reserve raising interest rates by quite a lot, quite rapidly, to reduce economic activity and bring down inflation. Okay, so there's been a good engine and effective breaks, both important things for the economy and for cars. And because this is relevant as we head toward an election year, I want to know, bottom line, how much credit should Biden actually get for this? So I'm going to give you the answer that economists would give, which is it's really hard to draw

a straight line between a president's policies and the exact performance of the economy. But what I do think we can say that's fair is that Biden made a bet at the beginning of his term that it was better to do too much to rev up that motor and keep the economy healing as fast as possible, growing as fast as possible, than to do too little. He had this experience of after the 2008 financial crisis when he was vice president, the government didn't do enough to rev the motor. And it led to a really long and slow recovery. Also, basically no inflation, but a long and slow recovery. He made the calculation that it was better to do too much. And if the good data we have right now continue, I think we can say that his bet appears to be right now, if the data hold, paying off.

Right. The fear at the time, of course, was that all of these policies that Biden was enacting, you know, the motor stuff, was going to really make inflation much worse and cause the economy to go into recession. But we have now lived into the answer, which is it hasn't. So that needle was threaded, by all accounts, pretty deftly. Yeah, I've been talking to officials inside the Biden administration for, you know, more than two years now about their economic strategy and what they believed would happen and what they hoped would happen. I think it's really fair to say that for that entire time they've been waiting for a moment

where inflation might get high, but it would come down, where growth would still look strong, and where they could finally sort of look around the room at the naysayers and say, I told you so. This economy is really good. And when you talk to people inside the administration, they are finally feeling like, hey, we've turned that corner. We might really pull this off. And we were right all along. Interesting. So this is their moment. It is.

And now the question is, can they convince everyone else in America to see it that way, too? We'll be right back. So, Jim, you've laid out why we should see the economy as improved and that Biden does deserve some credit for it. But whether Biden gets credit for it is up in the air. So the question is why? Well, I mean, there's a lot of reasons. First off, he absolutely is not getting very much credit from voters right now. He's what we call underwater on the economy.

Most people disapprove of his handling of it. And if you look at our most recent New York Times-Siena College poll, only like 20 percent of the country thinks that the economy is excellent or good. Good news for Biden, that's double what it was last year, but it's still only 20%. So a lot of people who are very online would say that's just because the media is not giving Biden enough credit for all the good things happening. I don't think that that is at all supported by the numbers. What's supported by the numbers is people have really good reason not to feel great about this economy. The biggest reason is just most people have not felt dramatic improvement in their lives and their standard of living while Biden has been president. Remember how I talked about wages outpacing inflation? Well, that just started this spring. That's really recent. For

the two years before that, people were actually falling behind inflation for most, you know, the typical worker. And there are all sorts of other measures by which people have been experiencing economic difficulty. But the biggest and most important one is prices. People just don't like inflation. And last year, inflation was as high as it's been in four decades. So if you want to know why people are grumpy about the economy, I actually don't think it's much of a mystery. They're grumpy because they haven't liked what they've seen from it up until now. They're also really not great, none of us are, at dealing in what you might think of as counterfactuals. What do you mean? The Biden administration could say,

hey, listen, if we'd had different policies, we could have had mass unemployment for the last two years. The job growth would have been much slower. You might not even have a job. But sitting, you know, where you are or where a typical worker is right now, you're not thinking, gee, I'm so glad that my life is better just because I have a slightly lower inflation adjusted salary, but I still have a job. Right? No, you're thinking, hey, I can't buy as much as I used to. And eggs are more expensive. Right. And so I think for the last two years, that was a real narrative in people's heads. And what the Biden team has had to fight against is the persistence of that narrative, even as the data got better.

I mean, you're basically saying the upturn is kind of too recent in a way. This inflation is still burned on people's brains. And then for the people who are actually benefiting from a better economy, they don't necessarily feel it because, you know, how do you feel if your life would be worse if certain things hadn't happened? As you say, counterfactual. People don't live their lives that way. Exactly. And also, just because the rate of inflation has fallen doesn't mean that prices have gone back down. So people have seen big price increases that are now baked in, like it's the new normal.

And a lower inflation rate just means slower increases off that price level. Prices remain high, they're just not going up as fast as they used to. Right, exactly. With the obvious caveat there being gas prices, which really have come down from where they were last summer and I think are part of the reason

why people are starting to feel a little bit better about the economy. Well, so what has the president been doing to try to change people's minds? Like convince them that he is actually the one responsible for the things that are going well? Biden and his team have been engaged all summer in a campaign to sort of rebrand the economy as a strength for him.

Thank you all very much. And Bob, thank you. It started with this big speech he gave in Chicago back in June. I want you to talk about the economic vision for this country. And that's where he sort of formally unveiled this concept that they call... Bidenomics. Bidenomics. I didn't come up with the name.

I really didn't. I now claim it. So what exactly is Bidenomics? Well, Bidenomics is a lot of things. It's actually a lot of the same stuff that Joe Biden has been talking about ever since he started as president. Bidenomics is about building an economy from the middle out and the bottom up, not the top down. It's about the government spending money in order to kickstart growth.

Making targeted investments to promote domestic production of semiconductors, batteries, electric cars. And I think probably most importantly here, it's about the suite of policies that Biden has signed. All the different bills. Infrastructure and chips and the Inflation Reduction Act and the American Rescue Plan that form the backbone of this record of accomplishment that the president is running on. Biden economics means industries of the future are going to grow right here at home. At home. I mean it. Not a joke.

But there are some big differences now from the way he talked about it even a few months ago. One of the biggest differences is that Joe Biden used to do a lot more of feeling people's pain when it came to inflation. Every economic speech, he would talk about how he recognized how hard high prices were for families to deal with

and that he was going to do more to bring them down. Now, he just doesn't talk as much about it at all. We're coming back and doing it again. America's going to lead again. He's really just leaning into manufacturing jobs and economic growth. He's boosting labor unions. He's helping low earners

and people of color and women make more money. And he's much more unapologetically owning the economy and less sort of hedging and apologizing for the parts of it he knows people don't like. In the heartland, in small towns, in every part of this country, to raise their kids on a good paycheck and keep their roots where they grew up. That's Bidenomics. Okay, so besides the speech, Jim, what else has Biden been doing to make this Bidenomics pitch? I will use the word. He does events around the country, ribbon-cutting type events, like at factories and clean energy projects, new infrastructure, often surrounded by union workers, and sometimes, you know, in districts where the member of Congress there or in a state with the senator there voted against the package, the bills that he's there to tout. Interesting. And he's talking at these events about the creation of new jobs. And then he likes to talk up about how his dad used to say to him, Joey, a job is

about more than a paycheck. You know, it's about dignity. And that's a very Joe Biden way of talking about the economy. Basically putting on display how all that investment is actually bearing fruit now. Right. And it helps that you can see more of the fruit. I mean, there's more actual ground being broken on these projects. There's more actual roads being built. When I was out on a reporting trip this summer, for the first time, I saw a road project with a sign next to it that said, you know, this project funded by Joe Biden's infrastructure law. They're starting to have those sorts of projects that can show people. And that helps to make that tangible case you're talking about. So is this new strategy working? It's hard to say exactly how much it's working, but we can look at where he's moving in the polls,

and we can look at people's perceptions of the economy. And on some measures, we're starting to see some improvement. And some of that may be because of the events, but it may also just be because the economy is improving. Like consumer confidence is going up by a variety of measures, but you would expect that given the improvement in the economic data. Biden's polls are still pretty bad on the economy. He's still underwater. And like I said, it's still just 20% of the country who thinks the economy is excellent or good. It's quite low. Yeah. In our poll, it's like half the country thinks it's poor. So he's got a lot of work to do. And these events, I think it's very fair to say, are not immediately catalyzing a turnaround for him on the public opinion front. Now, there's some debate in sort of broader Biden world and

also, you know, the political commentariat about why it is that Biden has not been able to move those numbers more, given how much he's done these events. One obvious problem is that people don't actually seem that tuned in to his record. A lot of polls show a lot of voters have no idea which bills Biden has signed into law on the economy and what he's done. But there are people certainly around the president who also point to the president himself as a problem in this, that he's just not a guy who is made to command and sell a spotlight over the economy. He's going to keep doing his Joe Biden events. And there's not a lot of creativity, I guess, is the word that they would use in the way that he's

trying to sell voters on the idea that he's really done something amazing. And there is some latent frustration in Democratic circles that that might just continue to be the case, that basically Biden is going to continue to struggle to sell voters on his economic successes so long as Biden himself is the messenger. You're saying there's only so much you can actually change about your PR strategy if your messenger is the same guy. Well, yeah. And part of it is that Joe Biden has a very good brand on the economy. Historically, he was middle class Joe, right, in the Obama administration. And that definitely helped him in the 2020 election. But now, I think it's hard for him to expand that brand. And I think particularly he is suffering right now from comparisons the Democrats make with the economic

salesmanship of his immediate predecessor, Donald Trump, who just had a very different approach to selling his own economic record and very different poll numbers with voters on the issue, perhaps as a result. Right. You know, he employed salesmanship tactics that I think the Biden folks don't feel comfortable with. He would bully individual companies over Twitter. You might remember before he was even elected, he went after this air conditioning manufacturer in Indiana called Carrier

over its plans to outsource jobs to Mexico. He criticized them on Twitter. The company kind of relented and he claimed credit for saving all those jobs. But in the end, hundreds of workers still got laid off. And he just didn't talk about that. And voters, including independents and Democrats, tended to rate him relatively highly on the economy, particularly when the economy was at very low unemployment before the pandemic hit. If we're thinking this is going to be a rematch between Biden and Trump, it's a rematch between these two very different people who are different in a million ways far beyond how they sell their economic policies.

So I guess my question is, how much will this ability to sell the economy determine the next election? I mean, as an economic policy reporter, it is always my preference that every election everywhere be decided on economic policy grounds. I do not think that is going to be the case this time. I don't think anyone in either the Trump or the Biden camps thinks that this is going to be a race won or lost on a debate over who has the better tax plan if it ends up being Biden versus Trump. But I will say this, and I don't think anyone disputes it, the underlying health of the economy will matter enormously to the outcome of a possible rematch. If the economy continues to improve the way that it is now and does not fall into recession, that takes away an argument that Trump would use against Biden. And if Biden can then, on top of that, convince voters, more voters than currently believe this, Biden can then, on top of that, convince voters, more voters than currently believe this, that he is actually to thank for that improvement in the economy.

That helps make his case easier for why he deserves a second term. If the economy falls into recession, I think there's a lot of Republicans who believe that would make the job easier for Trump or whoever their nominee is to beat Biden next fall. So ultimately, you're saying it's not really going to be about the economic policy of either candidate, but it is going to be about how people feel about the economy. And at least right now, according to our poll, only 20 percent of people feel like the economy is in a good place. So that's pretty bad for Biden. Yeah, I mean, that's in a poll where Biden and Trump are tied in a hypothetical rematch. I think if you asked the White House folks, they would absolutely much rather have that number closer to 50 percent than 20 percent. If you look historically, you'll see that the economy matters a lot in presidential elections. It can dictate presidential approval, which can dictate whether presidents get reelected. get reelected, they're well aware of that. And they are trying to sell voters on the idea that his economic policies have improved those economic conditions that people are feeling. And that, I think, is the sort of you break it, you buy it risk to all this, right? Like,

Bidenomics is, at its core, the president and his team picking their moment to convey to voters, actually, yes, this is Joe Biden's economy. Yes, I do own it. I own its outcomes. And I believe the outcomes are great and you should like it. But man, if we do fall into recession, if inflation does spike again, if people aren't feeling that improvement a year from now, as the election bears down, that will be a very difficult thing to pull off for Joe Biden, because he will have said this is Bidenomics and he will be open to the critique that Bidenomics has failed America. I mean, Bidenomics would be a Republican bumper sticker, right? Or a line in a late night show. Right. I think we will know a lot. Not everything. This is a very complicated potential election. But I think we will know a lot about the way things are going

a year from now when we see which party is using Bidenomics as sort of its slogan as part of making Jim, thank you. Thank you so much. On Friday, the Department of Labor reported that American employers added 187,000 jobs last month. It was the 31st straight monthly gain for one of the economy's key indicators, and it pushed the unemployment rate down to 3.5 percent, near a record low. We'll be right back. Here's what else you should know today. On Friday, the Food and Drug Administration approved the first pill for postpartum depression, a milestone considered likely to increase recognition and treatment of a debilitating condition that afflicts about half a million women in the United States every year. And on Sunday, the United States, the two-time reigning champion of women's soccer, was eliminated from the World Cup in a wrenching 5-4 defeat against Sweden that played out through penalty kicks. The Americans controlled the shootout until a trio of misses.

Yeah, it's a tough one, and there's just some dark, dark comedy and me missing a penalty in my last game ever so it was the final match for star athlete and activist megan rapinoe who had hoped to retire from the sport as a three-time champion Thank you. and John Ketchum. Contains original music by Marian Lozano, Diane Wong, and Brad Fisher, and was engineered by Alyssa Moxley. Our theme music is by Jim Brunberg and Ben Lansford of Wonderly. That's it for The Daily. I'm Sabrina Tavernisi. See you tomorrow.