Despite economic growth and employment, remains deeply unpopular | Real Time Headlines

To the untrained eye, Joe Biden The economic record during the president’s term appears to be excellent: Hiring is steady, gross domestic product is growing and consumer spending remains strong.

There is only one issue, one that will forever tarnish Biden’s legacy, one that embarrasses him and his party politically, but one that he will always be remembered for.

Inflation and the heavy burden it places on families, especially low-income families, dwarfs all the other good things that have happened under Biden. Although inflation has slowed significantly from its peak in mid-2022, consumers, investors and business owners continue to view it as the most pressing issue.

“Biden inherits an economy that was depressed by the pandemic, and he leaves behind an economy that is soaring,” said Mark Zandi, chief economist at Moody’s Analytics. “That said, many Americans There is still a flaw in their hearts… They feel like they have been ripped off.”

So even if the unemployment rate is significantly lower than when he took office, even if growth hits 3%, and even if the economy is described by top officials as the envy of the rest of the world, Biden’s economic story is still an amazing one. ending Donald Trump Prepare to return to the White House on Monday.

“To me, that’s the lasting legacy and difference between the two administrations,” said Joseph LaVorgna, chief U.S. economist at SMBC Nikko Securities and a senior economist in the first Trump administration. ) express. “Inflation under President Biden is two and a half times higher than it was under President Trump. That’s essentially the key catalyst for a return to Trump’s policies, which is very good growth and low and stable inflation.” ”

Biden left office with an overall approval rating of just 36%, the lowest point of his presidency, and only 33% approved of his handling of the economy. A CNN poll.

Looking at various data points can help understand what’s happening with inflation and how it affects perceptions of the overall economy.

Biden’s numbers

In fact, the cumulative inflation rate during Trump’s first term from 2017-21 was below 8%. consumer price index. For Biden, it’s 21%. It doesn’t seem to matter that the economy actually grew 11% under Biden (versus 8.6% under Trump). Inflation peaked above 9% in June 2022 and has remained above the Fed’s 2% target every month since March 2021.

As prices for a variety of goods and services rise and remain high, wages have struggled to keep up. Even if it picks up by 2024, the 19% increase in average hourly earnings under Biden will still be below the rate of inflation.

As a result, the gap between wages and prices has caused consumer confidence to be 6% lower under Biden than when he took office, as measured by a widely watched indicator. University of Michigan Sentiment Survey. This makes sense given that when Biden took office in January 2021, the economy was still in the shadow of the pandemic, with many people choosing to spend the holidays away from friends and family in late 2020 due to the spread of omicron variants.

Why is consumer sentiment so low?

After all, despite egg price It has soared 180% in four years, household net worth has surged, and consumers continue to spend. Retail sales increased by more than 20% home net worth According to data from the Federal Reserve, the current total is US$169 trillion, an increase of 28% from the end of 2020.

The largest contributor to household balance sheets is If the stock market fluctuates violently and the value of real estate.

Since Biden took office, tech companies have seen their share prices rise, driven by advances in artificial intelligence. The Dow Jones Industrial Average alone has risen by more than 40%, while the Nasdaq Index, which is more focused on Silicon Valley companies, has risen by nearly 50%.

Home prices rose 24% during the same period, while home real estate values ​​increased 42%, according to the Federal Reserve.

Still, as home prices rise and borrowing rates fall, the dream of homeownership becomes increasingly elusive. The typical 30-year mortgage rate is now over 7%, more than double what it was in January 2021.

The surge in wealth, especially in the stock market, has also created a distortion of interests, primarily in favor of those with the resources to buy stocks.

Proportion of total Net worth held by the richest 1% That number was 30.8%, the highest level in three years, according to the Federal Reserve. Likewise, 1% controls slightly less than 50% of stock market related wealththis number has gradually increased over the past few years. The bottom 50% of earners own just 1% of stock market wealth, a number that has effectively doubled during the Biden administration.

All the various indicators seem to be related to the issue of inflation and how we got here.

a historical question

Economists and policymakers have similar diagnoses of the problem, albeit with some disagreement: A supply-demand imbalance at the start of the pandemic hit supply chains, driving up the cost of goods rather than services. Trillions in fiscal and monetary stimulus aimed at stemming the damage from the coronavirus have exacerbated the problem by leaving too much money chasing too few goods. Finally, a monetary response of first lowering interest rates and then higher interest rates is adopted. Even Fed officials admit this slow pace further pushing up prices.

Biden fires a slew of fiscal ammunition for a post-pandemic economy, including controversial $1.9 trillion American Rescue Plan Critics say the Inflation Reduction Act of 2022 increases the burden of inflation, but supporters say the measures provide critical infrastructure and climate mitigation spending that will pay dividends for years to come.

“We have very good economic growth and a pretty strong labor market,” LaVolgna said. “The question is, at what price?”

In fact, the labor market has been strong, with employers trying to solve their own supply and demand mismatches, creating millions of jobs, and at one point, there were openings The ratio to the number of existing workers is 2 to 1 profit. Biden economy bears witness unemployment rate It fell by more than 2 percentage points and although it rose slightly in mid-2024, it looks stable recently.

However, it all seems to come back to inflation.

The price Lavonia mentioned is a bloated federal budget, with a deficit set to reach $1.8 trillion in 2024 and far higher than the deficit in 2019 so far. FY2025 Financing $36.2 trillion in debt. Taxpayers spent more than $1 trillion last year on debt interest costs alone and are expected to pay about $1.2 trillion this year, a total that exceeds all other spending except Social Security, defense and health care.

The government’s current deficit-to-GDP ratio is 6%, which is unheard of in an expansionary economy. Before the 2008 financial crisis, the gap relative to total output had never been so large since the United States emerged from the economic fallout of World War II in 1945.

The bill will then be borne by future generations saddled with today’s debts and deficits.

“This is a problem, a big problem,” Zandi said.

In fact, most of the job growth came from government and health care, both of which were associated with expansionary fiscal policy, as well as leisure and hospitality, both of which were associated with expansionary fiscal policy. Until May 2024 Regain the jobs lost during the COVID-19 pandemic.

While challenges abound, most officials say the U.S. economy is healthy.

Zandi said his global clients often ask him what the “secret” is that makes the United States so dynamic compared with its global peers. Fed Chairman Jerome PowellTrump, who often calls the U.S. fiscal path “unsustainable,” said he has received similar questions.

“In these international meetings that I attend, the story is this… how well the United States is doing,” Powell said at the meeting. December press conference. “If you look around the world, you see a lot of economies that are growing slowly and continuing to struggle with inflation. So I’m very pleased with the state of the economy and the performance of the economy and we want to continue that momentum.”

However, uncertainty about the direction of the Federal Reserve will become a dark cloud hanging over Trump’s economy.

The central bank raised its main borrowing rate by 5.25 percentage points as it battled inflation, but down one percentage point since then As officials become increasingly comfortable with the direction of inflation. However, there is considerable uncertainty about what will happen next, and the market is pricing in caution Cut another quarter or half a percentage point Remainder of 2025.

As Biden leaves the White House, he leaves behind countless questions about what could have been done to make things better and how they could have gotten worse.

“Twenty years from now, economists are going to view this as a pretty amazing performance,” Zandi said. “The story is not over here. But my sense is that history will judge this period as a future crisis.” of a period.”