The NPR Politics Podcast - Is Bidenomics Working?

Episode Date: December 27, 2023

President Biden has been touting his economic plan as the economy recovers after the pandemic. We look at how the economy fared in 2023 and what could be in store in 2024. This episode: senior White House correspondent Tamara Keith, White House correspondent Asma Khalid, and chief economics correspondent Scott Horsley.This episode was edited by Erica Morrison. It was produced by Jeongyoon Han and Casey Morell. Our executive producer is Muthoni Muturi.Unlock access to this and other bonus content by supporting The NPR Politics Podcast+. Sign up via Apple Podcasts or at plus.npr.org. Connect:Email the show at [e-mail] the NPR Politics Podcast Facebook Group.Subscribe to the NPR Politics Newsletter.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Hey there, it's the NPR Politics Podcast. I'm Tamara Keith. I cover the White House. I'm Asma Khalid. I also cover the White House. And longtime friend of the pod, NPR Chief Economics Correspondent Scott Horsley is here. Hi, Scott. Great to be with y'all. And today we are looking back at the year that was for the economy, that year being 2023. Asma, you and I know that President Biden has been working very hard to make the term Bidenomics stick.

Under my plan, under Bidenomics, we've created jobs as hope. That's Bidenomics. That's Bidenomics in action. Bidenomics is just another way of saying restoring the American dream. And also to convince people that it's a positive thing. That's right. And I think one of the confusing things about this term is what exactly it means. I did a story some months ago, and I spoke to the White House communications director, Ben LeBow, and I asked him about this. And essentially what he said, Tam, is that this is a wraparound for a few things,

for a couple of core pillars of the president's economic agenda, things like empowering workers, investing in America, and lowering costs. And it's that last issue that Republicans have jumped on. They mock this term. They say that really it's a sign that Biden is embracing inflation and Biden is embracing rising costs. And it's a result of the president's economic agenda that people still feel, some folks, that the economy is not doing well when it comes to rising costs. Scott, so based on that definition, which is sort of like Bidenomics is in your heart, Bidenomics is everything. But is Bidenomics working economically? I think it's just too soon to tell. Certainly, I think the claim that government spending early in the pandemic was to blame for inflation is kind of nonsense. I mean, inflation has been a worldwide problem, and it's come down

much more rapidly in the U.S. than in most of our peer countries. So that part of the claim is hard to swallow. But it's also hard to say really what the outcome of some of those investments is. The short-term investments in pandemic programs like the expanded child tax credit and subsidies for child care have run out by now. And the big investments in clean energy and computer chips, well, those are going to have a payday, if at all, years into the future. So I think it's just premature to say. It's always the case that presidents get more credit or blame for economic conditions than they deserve, given the limited role they actually play. But Biden has placed some big bets here, and we're going to have to

wait a while to know where they pay off. We did a pod similar to this back in December of 2022 and reviewed how the economy had done that year. I went back and looked at what we were talking about. And in December of 2022, inflation was super high, Scott. It was six and a half percent that December. So what are we looking at now in terms of inflation? Inflation has fallen by more than half since the end of last year. It's come down almost two-thirds from its peak in the middle of 2022. The inflation rate in November was 3.1%. That's the most recent data that we have. That is still higher than we'd like it to be, but it is a huge improvement over the last year and a half. And a lot of people thought to get that kind of

improvement in inflation, we were going to have to slow the economy so much that a bunch of people would lose their jobs. Instead, the economy has added more than two and a half million jobs in the first 11 months of 2023. The unemployment rate has stayed under 4% for 22 months in a row. That's the longest streak since the Vietnam War. Joe Biden does talk about that a lot when he talks about Bidenomics. Oh, yeah. Jobs is very much a talking point for the president. And, you know, his jobs record is unparalleled. I mean, he's got a terrific jobs record, obviously coming back from a deep hole coming out of the pandemic.

But the good news is, more recently, wages have finally begun to grow faster than inflation for the last seven months or so. GDP grew at an annual rate of more than 5% in the third quarter, which is really strong. By almost any objective measure, this is a good economy. Now, to be sure, there are some warts and we can talk about those. But if you were to blindfold a political consultant and say, look, here's the backdrop. Is this something we can campaign on? She would undoubtedly say yes. Okay. So here is the great mystery to me, which is that by the numbers, Scott, you just went through all of these objectively strong economic numbers. And yet it is just not translating to how people feel. I mean, poll after poll, sentiment, all of these things, Asma, and you've gone out and

you've interviewed voters. People say that the economy stinks or that things are too expensive or, you know, like people do not have a positive feeling about the economy. That's right. And I would say so much of that is tied to the rather turbulent time period of inflation that people experienced. You know, I was talking to a White House official recently, and that person told me that they have an understanding that people are rightfully, you know, that they were frustrated because there was this long period of costs increasing, right? We were just talking about the fact that inflation in the summer of 2022 was 9%. This was inflation increasing for a while, month after month, elevated prices, you know,

elevated gas prices, elevated grocery bill prices that people, I would say, frankly, Tam, you and I probably had never seen. And so it takes some time, is what the administration is thinking, for people to believe that the downward trajectory is real and that the downward trajectory is here to stay because that period of going up existed for a good amount of time. What the White House thinks is that they are on a good trajectory now, that inflation has dipped down. And they think that if it continues in the months ahead, that folks will have that kind of anxiety dip down and that will not continue to exist. But I mean, I think that there's an accuracy to what they're saying there, that inflation is a big part of the

reason why folks did not have a great view of the economy. And then frankly, there's been a pretty grim view of the economy that many people have. Scott, you love talking about the market basket. I know this. My question here is, if you took a 2019 market basket and compared it to a 2023 market basket, are things more expensive? Yes, inflation has come down, but prices haven't come down to where they were when people felt like the economy was better. That's right. And that's the challenge, is that inflation can come down, but it doesn't necessarily mean prices come down. It just means prices have leveled off. Now, some prices have actually come down. Eggs, which were the poster child of inflation in 2022, those prices have really fallen and they are pretty much back to where they were sort of pre-avian flu epidemic. Gasoline prices

have also come down a lot. They were at $5 and change in June of 2022. A lot of gas stations have had to pull out their big number twos to put up on the signs to say that gas prices are under $3 in much of the country. And that does start to get people's attention, especially when those gas prices stay low for a while. We did get a consumer sentiment poll from the University of Michigan in the early part of December that did actually show a pretty significant uptick in sentiment for the first time in five months. It's not back to where it was by any means in the rosy pre-pandemic era, but it was an uptick. And it does suggest that as some of these more visible prices like groceries and gasoline actually come down, people do start to feel a little bit better. But whether they feel enough better in the coming year to improve the president's standing is another question.

All right. We're going to take a quick break. And when we get back, let's talk about that. And we're back. And I promised you politics, and we're going to talk about politics. So as we have discussed, the economy is objectively better than it was a year ago. Consumer sentiment is maybe getting a little bit better, but this is not translating to approval of President Biden's handling of the economy or even approval of President Biden more generally. Voters do not view him as particularly strong on the economy, Asma. That's right. And I would say that's for two main reasons. We hear a lot when you talk to voters about costs. And so folks still have a negative view of where inflation is. Inflation

has dipped, as we were saying, but people are still broadly frustrated, I would say, with costs. The second big thing you hear a lot about is housing affordability. I cannot tell you the amount of times that comes up. I don't know that any president of the United States has a real ability to control this. Obviously, interest rates have gone up. I think the 30-year interest rate, mortgage rate is at 7%, 8%. And so that is a big difference from where it was when the pandemic started. But the president doesn't control the interest rates. That's the purview of the Federal Reserve. And this president, President Biden, has made it very clear he does not want to and does not think it's appropriate for a president to comment on the actions of the Federal Reserve. But those are two points that you hear often from

voters. These are issues of affordability. And one last thing on this, Tam, is that I think the reason people feel so emotional about the costs of things, and I hear this from economists, is that it's something that affects so many, many people. If unemployment goes from 4.2% to 4.4%, it affects a subset of the population, but it affects those people largely who lost a job. When things go up, when mortgage rates go up, when gas prices have gone up in the past, that affects a very, very large swath of the American public. Yeah, although I will say, you know, when mortgage rates go up, it certainly affects anyone who wants to buy a home. It also makes it harder for someone who already owns a home to trade up because they'd have to swap their cheap mortgage for a more expensive one.

But it also means people who have money in the bank are finally getting better interest payments on their savings accounts. Rising interest rates are a double-edged sword. They make it more expensive to borrow money, but they are a reward for savers and for people who have some savings. That is a plus. Now, I will say that the savings rate has been disappointingly low in recent years. Yeah, I was going to say, Scott, how many folks really have much of a savings rate, you know, month to month within the broad American public at this point? Yeah, and a lot of people, in fact, are having to turn to credit cards to pay the bills. And if you're carrying a balance on your credit card, credit card balances topped a trillion dollars

this past year, it's costing in excess of 20% on average to finance that borrowing. It's also costing more to borrow money to grow a business. And by the way, it's costing more for the government to borrow money. The federal government now spends more on interest payments on the federal debt than it does on Medicaid or veterans programs or food stamps or education. So higher borrowing costs are definitely a crimp on the economy. Well, and there's a certain feeling of hopelessness among some young people that, like, they're never going to be able to buy a house at this rate. You know, houses are expensive and the high interest rates just make them that much more expensive. Scott, what are you looking ahead to in 2024 in terms of the economy?

Is there a sense of where the Fed is headed, where these interest rates are headed? Is it safe to say that there has been a soft landing for the economy, or is it too soon to say that? I think it's too soon to say that, but I think it is possible to say that there is a glide path towards a soft landing that one can see. Now, there's always curveballs. Unforeseen events could disrupt that. But it certainly seems possible now, perhaps more possible than it did this time last year, to see inflation settling back down to around the 2% target that the Fed has set without a big spike in unemployment, without a recession, or at least a severe recession, that would be what we

call a soft landing. And I think that glide path is wider and more visible now than it was a year ago. Unfortunately, I don't think there's gonna be anything soft about the upcoming political campaign. So I don't envy you and Asma and my other friends who are covering that. I think that's gonna be a very bumpy ride. Well, and Asma, do you have any sense of how the campaign or how the White House are going to do or how they might try to change perceptions of the economy, assuming that the numbers stay in a relatively decent place? Well, the administration is certainly aware that this issue of costs

continues to be really top of mind for a lot of voters. And the president's top economic advisor had an end-of-year memo outlay Al Brainard in which he says, lowering costs for American families remains the president's top economic priority in the year ahead. And to me, this is notable because you've often heard the president say, oh, inflation has dipped down, inflation has dipped down. But there's clearly a recognition, I think, in seeing this messaging that they know this remains a very big priority for the American public. One thing that you'll hear sometimes at some of these campaign stops that seems to really resonate with the crowd is the decision that the Biden White House took to cap the price of insulin for Medicare patients to $35 a month. It's something that, you know,

voters tangibly feel, or at least some voters do. And after that White House announcement, a major pharmaceutical company decided to follow suit and also lower its insulin prices. And it's something as well that the president's top economic advisor pointed out, that this is something that the Biden White House did. And I can expect that you will see the president try to portray this contrast with Republicans in Congress who they say are trying to repeal some of the cost-reducing policies specifically around health care. Asma, it does seem like the White House is putting a lot of emphasis on the economic levers or the cost levers that it can control or at least say that it is doing something about.

What I'm thinking about here is health care. You talked about insulin. Also, though, junk fees, which like being against hidden fees from Ticketmaster is like really politically easy. Being against hidden fees on airline tickets or, you know, fighting against companies that are hiding how much they're going to charge you in the end. That kind of thing is is a sort of a populist economic message. It is. And I will say, Tam, it's not clear to us yet, I think, how much the president will be able to do unilaterally to curb some of these junk fees.

You mentioned it has been a priority of his, whether this is in the airline industry, Ticketmaster, other companies of this sort. But ultimately, these are going to be regulations. No doubt there will be probably some corporate pushback to some of this. And so we'll have to see how the president and to what degree he's able to actually even curb some of these fees. I have to say, you know, that when I kind of shake my head that some of the junk fee campaigning that the White House does,

because from a macroeconomic point of view, it seems like such a small ball, like the White House just setting its ambitions very low. And yet, it is one of those things that seems to resonate with voters to a degree all out of proportion to its real economic impact. All right, Scott, thank you, as always. Great to be with you. All right, we're going to leave it there for today. I'm Tamara Keith. I cover the White House. And I'm Asma Khalid. I also cover the White House. And thank you for listening to the NPR Politics Podcast.