Joe Biden's Economy Problem
And thoughts on the rematch that no one wants
Author’s note: I think one thing people like about The Sunday Morning Post is that it does not have a political ax to grind. We need spaces like that in American life, and I like being able to offer a place for people to absorb information and interact with one another that is not infused with toxic political tribalism. And yet, like it or not, the results of elections and who is in charge in Washington D.C. impacts everything: the economy, the cost of living, and so much more. With that in mind, I am writing this week about the upcoming presidential election. Hope you enjoy and would welcome your thoughts.
Joe Biden has a problem. It is Memorial Day Weekend in an election year, and people are perturbed about the economy. That spells trouble for the president in November, even in a rematch against a candidate as polarizing as Donald J. Trump.
Does the Campaign Matter?
There are some political scientists out there who believe that the presidential campaigns themselves do not actually matter, or at least not to the degree that many people assume they do. That’s right: it is believed by some the hundreds of millions of dollars that will be spent on this year’s presidential race on everything from TV ads to paid consultants to mailers and yard signs, will not actually do much besides make the paid political class a lot of money (and infuse local media with much-needed ad revenue from those ubiquitous commercials, especially if said media outlets are operating in battleground states).
If the campaigns themselves don’t matter that much, what then, does? Inflation, gas prices, the stock market, unemployment and wages, all of the larger macroeconomic conditions that a president may be able to influence but not actually control: these are all variables that impact how voters are feeling and ones that are likely to influence the ways that many Americans will cast their ballots come November.
The economy, broadly speaking, consistently polls as the number one thing on voters’ minds. This is true across all parties and demographics, and across time through virtually every election cycle. When feelings on the economy are positive, the party in power typically does well. When the economic mood is sour, challengers usually do better.
And the Survey Says…
How are people feeling about the economy right now? Not great! According to recent Gallup polling, only 24% of Americans rate the economy as “excellent” or “good,” while a full 76% of Americans say it is “only fair” or “poor.” Those are pretty decisive numbers and reflect more than just simple partisanship or some kind of outlier sample in the poll. Moreover, 67% of Americans say the economy is worsening, a high point for the year so far, up from 63% in March and 61% in February. Just 29% say the economy is getting better.
The underwater numbers on the economy and the worsening trend are big problems for the president. Consider the same Gallup poll administered in the previous two presidential election years, 2016 and 2020. Despite different presidents and much different economies, the numbers six months out from Election Day were very similar to what they are today:
In 2020, 36% of Americans ranked the economy as good or excellent, and 63% said it was only fair or poor. With these economic numbers upside down, the incumbent (Trump) lost to the challenger (Biden).
In 2016, 25% ranked the economy as good or excellent, and 74% said it was only fair or poor. Although there was no incumbent because President Obama was termed out, we can somewhat consider “the party-in-power candidate” to have been Hillary Clinton, who lost to the challenger candidate, Trump.
There are plenty of other examples as well, such as in 1992 when only 11% of Americans rated the economy positively. That year, the upstart governor of Arkansas, Bill Clinton, upset the sitting president George H. W. Bush, despite (and, perhaps, because of) Bush being a much more widely known commodity. People wanted change in 1992, and Bill Clinton provided it.
To be sure, there are always plenty of other variables at play in any particular election cycle. This was for sure true in 2020 in the midst of a global pandemic and particularly with a candidate as unique and polarizing as Donald Trump sitting as the incumbent in the White House. But just like in 1992, both 2016 and 2020 were change elections. People wanted a change from the Obama/Clinton years, so they voted for Trump in 2016. And then people wanted a change from Trump in 2020, so they voted for Biden.
People right now seem to want change again. Political commentator Nate Cohn said on a recent episode of The Daily podcast that there is a general feeling among both parties that things are not going well, and people are ready for a reset. With that as context, according to a recent REUTERS/Ipsos poll, Biden’s favorability is at a low point in his presidency, with just 36% of Americans approving of the way he is doing his job with 59% saying they disapprove:
Per that REUTERS/Ipsos poll, the President is now underwater with both urban and suburban voters, men and women, college and non-college degrees, every age demographic, and in every region of the country. By comparison, in April 2012 (the same amount of time prior to the election that year as the Biden polling above from this year), President Obama’s job approval rating was 50%, and he was subsequently re-elected that November. Interestingly enough, six months out from the election in 2020, President Trump carried a similar approval rating of 49%, but as we all know he failed to win re-election.
But back to President Biden: why are the president’s numbers so weak? To be sure, there is a lot going on in the world right now. Plenty of voters have strong feelings on the Israel-Gaza War and other international issues like Ukraine, for example. Immigration, climate, and abortion are longstanding issues that are on a lot of people’s minds in particularly acute ways right now. But above all else, it is still the economy. Inflation persists. Although the stock market is doing well, many people are not feeling that. And the labor market is complicated; even as unemployment sits near historical lows, people still feel like it is a tough time to find a job and they are frustrated with the hiring environment.
But Wait: Are People Actually…Wrong?
Are people wrong? Well, a person’s views of the economy depends a lot on where they sit. If you are a decent wage earner with a lot of investable assets, you probably feel pretty good about things right now. If you are just getting started out or are a mid-career, middle-wage earner and the prospect of saving money amid rising costs let alone buying a house or making other big financial decisions seems especially distant or overwhelming, your views are likely to be on the other side of the coin.
But there is something psychological going on too, and it’s working against Biden for sure. (See from the archives: the Vibes are Off). The economy is not good for every single person at all times; that is certainly true. But Americans are also collectively and factually wrong about certain aspects of it. Consider the results of a recent Harris-Guardian poll:
56% of Americans believe the economy is in a recession. But, in fact, we have had seven straight quarters of positive economic growth.
49% of Americans believe the stock market is down for the year. In fact, the S&P 500 is up about 12% year-to-date and was also up about 24% last year. All of the major stock indexes are near all-time highs, with the Dow Jones closing above 40,000 this past week for the first time ever!
49% of Americans believe that unemployment is at a 50-year high. In fact, current unemployment is 3.9%, which is near a 50-year low.
What is going on? I see three things at play. First, economic perceptions are sticky. Inflation has cooled a bit for sure, but Americans have still lived through 2-3+ years of rising prices, and they are fed up about it. Inflation is still top of mind. And plus, prices for most things haven’t actually come down yet, it is just that inflation has decelerated, and Americans are not giving the President credit for that.
Second, human psychology is such that we internalize negative feelings more intensely than positive ones. For example, most people feel the negative impact of losing $20 when gambling much more intensely than they feel the positive joy of winning $20. This is known as loss aversion in the world of economics and psychology, and it may help explain why people are feeling so negative. All the doom and gloom talk of an expected recession, the conviction that the pendulum will inevitably swing back on the otherwise positive economy, and the general feeling that things are a little “weird” in the economy right now have people bracing for the worst. People are feeling the negative more than they are appreciating the positive, which may be why polls show people having very pessimistic views on the economy even though there are some very positive stories to tell about it.
Lastly, there is, of course, a heavy partisan component to perceptions about the economy and the state of things in general. This partisan lens has only become more pronounced over time. The graph below of CBS News polling data going back to 1990 shows what percentage of Americans have said the economy is “good” over the past 30+ years separated by party. In every single Democratic presidency (Clinton, Obama, and Biden), Democrats have had more positive feelings about the economy than Republicans. In every single Republic presidency (Bush I, Bush II, and Trump), Republicans have had more positive views about the economy than Democrats. Only in the Clinton years were the feelings closely correlated. Since then, views have become much more divergent.
It is fascinating to me, for example, that in 2019 and the early part of 2020, roughly 90% of Republicans said the economy was good under Trump and only about 20% of Democrats did. That is quite a spread! And then you can see the exact reversal in the chart above when Democrats’ feelings on the economy suddenly became more positive and Republicans’ views went into a freewill. It wasn’t an accident that things switched the way they did: the reversal took place in November 2020 when Biden was elected! It was basically the same economy and the same set of factors at play, but Republicans suddenly hated it and Democrats suddenly liked it just because of who was in charge.
It’s worth asking the question: why the divergence? For starters, it is perfectly fair to say that Republicans and Democrats just have different ideas on how the economy should be run and what it means for the economy to be “good.” I’m painting with pretty broad brushes here, but Republicans typically want less government intervention, fewer regulations, and lower taxes. Democrats, on the other hand, want some guardrails on the perceived excesses and inequalities of capitalism, more of a regulatory framework, and a more progressive tax structure. Obviously it is more complicated than all that and there are also some libertarian and populist views that cut across the political spectrum and outside of it in some unique ways (plus the economic philosophy of Donald Trump is honestly kind of an enigma), but it is fair to say that Republicans and Democrats are going to see things differently because of their differing values and beliefs (and that’s okay!).
As a quick related aside, the Wall Street Journal had a fascinating piece out just this weekend with an interesting perspective that could help explain some of the split. Inflation is, in fact, generally higher right now in red states versus blue! The chart below appeared on the WSJ main page from the article, showing statistical evidence that inflation is generally lower in blue states than in red ones:
But certainly there is a significant political component to all of this, as well, the general tribalism of it all, or the drug of partisanship. Contrary to what a subset of political scientists may believe about campaigns not mattering, the candidates themselves plus their allies on the campaign trail and in the media do influence the way people are feeling, which therefore impacts how they vote. And let’s face it: Republicans kind of have an incentive right now for people to feel bad about the economy. The worse voters feel, the more likely it is that people will vote for change (i.e. Trump) this November. Whether they actually believe the economy is in poor shape or they just want people to feel that way, the steady onslaught of partisan perspective saying how terrible things are is surely skewing many Americans’ views.
There is more going on with the collective psychology of the American electorate, but it’s beyond the scope of today’s article and worthy of an article (or series of articles) of its own. In short, however, I don’t think it’s any surprise that the partisan divergence in perceptions about the economy surged in the early 2000s. This was the exact moment when 1) the influence of cable news significantly expanded 2) social media as we know it today was born. It was around this time that people started self-selecting their sources of information, both in the world of traditional media (e.g. television and newspapers) and in new media (e.g. Facebook, Twitter, etc.). People started to choose media that both shaped and reinforced their preexisting views, which led to a siloing out of political opinion.
There is no Walter Cronkite anymore to tell Americans how it is. There is no single source of media that everyone trusts and respects to give them the news without spin or bias. Walter Cronkite was once known as “the most trusted man in America.” Who could you possibly say that about today? To part of America it may be Sean Hannity. To another part, the most trusted person might be Rachel Maddow. To a lot of others, it could be Jon Stewart. In 2013, Readers Digest asked the question. The answer? Tom Hanks.
Unfortunately, however, there is no one who everyone comes to as a reliable source of trusted information anymore. That makes it hard to have a baseline conversation about a question that is both as straightforward and complicated as how is the economy doing.
The Path for Biden
Back to the rematch that no one seems to want: a lot of what I have written above may make it seem like the odds are long for Biden to win re-election this year, but that all ignores one crucial variable: his opponent. The president is not running against a vacuum or void, and he is also not running against a generic Republican; he is running against one of the only people in American who is nearly as unpopular as him.
According to FiveThirtyEight, Donald Trump’s approval rating rests at 41.6%, just a notch above Biden’s 38.4%. Both candidates are deeply unpopular. I think it is safe to say that if Nikki Haley or some other Republican who might appeal to a large swath of independents and even to some Democrats were the Republican nominee, we would be looking at a blowout this November.
So what’s the path for Biden? One way to win re-election would be to figure out how to explain to the American voters that the economy is not as bad as they think, and that economic conditions have actually been more resilient and buoyant than many people believed they would be coming out out of the pandemic. But the time is wearing thin to make that case, and as noted above, people’s views about things like inflation are very sticky and probably won’t change that much between now and November. It would certainly help Biden quite a bit if gas prices, food prices, and interest rates would all tick down a bit between now and Election Day without a corresponding drop in the stock market or a jump in unemployment.
Giving hope to Biden and his supporters, there are, in fact, examples of presidents winning re-election amid poor economic sentiment. In 2012, for example, just 12% of Americans ranked the economy as good or excellent, and 87% said it was fair or poor (I couldn’t believe these numbers when I found them in researching this article; I did not remember sentiment being that poor in 2012). That is an even wider divergence than we see today, and the incumbent, President Obama, still actually defeated the challenger, Mitt Romney, somewhat handily. And in 2004, only 35% of voters said the economy was positive, and the incumbent George W. Bush defeated the challenger John Kerry. So there is hope for Biden that he can overcome the current-day poor feelings about the economy and win this November in the same way as those other incumbents did.
More realistically, however, the path for a successful Biden re-election is probably to constantly and thoroughly remind the American electorate of all of his opponent’s flaws, which are many. Donald Trump himself on the campaign trail is likely to reinforce these flaws a bit himself. It is not a super inspiring message to campaign on, but “you-may-not-like-me-but-that-guy-is-worse” is probably going to be a key underlying theme this fall from the Biden camp. Turnout is sure to be driven through several other important topics to many Americans like reproductive rights, climate, and the threat to democracy of a Trump win, for sure.
The Path for Trump
With the aforementioned topics high on the checklist for many, the economy is still going to be the #1 issue on the mind of voters this November. Trump’s clearest path to victory is to beat Biden on this question and to make sure Americans know it. Indeed, the April REUTERS/Ipsos poll found that 41% of Americans favor Trump to handle the economy while 34% prefer Biden.
And as noted above, the 2024 presidential race is shaping up to be a change election. Donald Trump’s clearest path to winning in November is to solidify himself as the change candidate. This does feel ironic as Trump is very much a known commodity and it is not like Americans do not have pre-existing feelings about him. Yet he has somehow positioned himself as the change candidate in a change year, which is a good spot to be as a candidate.
There is also some evidence that Trump has made inroads among Black and Hispanic voters and that his campaign is making a concerted effort to flood TV and radio stations in predominantly minority markets with ads to continue to woo African American and Latino voters. In 2020, 92% of African-Americans voted for Biden. But some recent polling shows that expected rate could drop as low at 75% in 2024. It would not take much more of a swing than that among Black and Hispanic voters to swing the whole election.
This is a topic worthy of its own consideration, but I think many minority voters have social and religious values that are actually more conservative than the current Democratic Party as a whole, and the leftward tilt of the Progressive wing of the Democratic Party in recent years has left some of these voters looking elsewhere in the electoral landscape. That being said, as is the main premise of this week’s article, Black and Hispanic voters care, of course, an awful lot about the economy as well, and they share the same poor feelings about how things are going as the rest of the electorate as a whole, which is perhaps the main reason why Biden’s share of the African-American vote this November is almost sure to be less than the 92% he won in 2020.
Final Thoughts
It is already Memorial Day, and yet, it is only Memorial Day. A lot can happen in the next 5+ months. Donald Trump will have to choose a running mate, for example, who may help him consolidate support or who could possibly turn off moderates. The party conventions will take place. Debates between Biden and Trump will happen, the first of which will take place on the surprisingly early date of June 27th, and the second of which will be in September.
Above all else, the world will continue to spin. Things will happen with the economy. International conflicts in the Middle East and Ukraine will continue to weigh heavy on people’s minds, particularly with regard to the role the United States can and should play in each. Millions of Americans are concerned (or, more accurately, angry) about reproductive restrictions, which is sure to drive a lot of motivated voters to the polls in November. There are dozens of other issues voters care about, any one of which could take surprising center stage.
But the landscape for Biden is challenging, for sure. The polling noted above on favorability ratings and feelings on the economy are important, but more acute recent polling in several battleground states spells even more trouble for the president, showing that Trump leads Biden narrowly in Arizona, Georgia, Michigan, and Pennsylvania and leads even more substantially in Nevada and North Carolina. These results closely mirrored similar New York Times/Sienna battleground polling that was published the week prior. It is very unlikely that Biden can defeat Trump in November without winning a handful of these key states. Of all six of these battleground states, Trump won only North Carolina in 2020, but if he picks off two or three of the others this November, it could be game over for Biden.
Other variables loom large, as well, including the presence of Robert Kennedy Jr. on the ballot, who could pull some votes from Trump among the anti-vax crowd, but who is also likely to pull some votes from Biden thanks in part to the legacy of his last name. Many others will vote for Kennedy simply as a “none-of-the-above” protest vote. Heck, Ross Perot won nearly 20% of the national vote in 1992. Would more of these Kennedy protest votes have otherwise gone to Biden or Trump were Kennedy not on the ballot? I expect a hair more would go to Biden from voters who just simply can not bring themselves to vote for Trump, but might instead vote for Kennedy as a protest because they also don’t want to vote for Biden.
I think the best thing for Democrats to understand right now is the urgency of the fact that Donald Trump can (and very well might) win this election. I can just picture many Democrats (and indeed, non-MAGA Republicans and swaths of independents) saying as they read this, how can Trump possibly win. But people said the same thing in 2016, and he did win.
Believe it or note, Vegas oddsmakers have Trump as the favorite right now. Curiously enough, as expected Biden is seen as the second most likely winner, but after him? It is not Robert Kennedy or even Kamala Harris. The third best odds to be the next president? Michelle Obama. I wouldn’t put much stock in a potential Michelle Obama presidency, but the oddsmakers know something many Democrats don’t, which is that as of Memorial Day 2024, the favorite to win the presidency is, in fact, Donald Trump.
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Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.
No Weekly Round-Up this week in part because it is Memorial Day and today’s article was already a little bit dense. I hope everyone is having a nice weekend. See you next week.