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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The US economy has done better than anyone would have thought over the past year in terms of economic output, labour market resilience and slowing inflation. Indeed, a recent US Treasury analysis of IMF data suggests it has done better than any of its international peers. A good chunk of this is down to the Biden administration’s post-pandemic bailout of consumers, who have continued spending, and the “new supply side” fiscal stimulus that has gone into supporting construction and manufacturing.
Yet the president has seen little upside in terms of voter sentiment. Joe Biden ended 2023 with a 39 per cent job approval rating, according to Gallup polling, and his approval among even Democrats has ticked down. He trails Donald Trump in most polls. Elections are supposed to be about “the economy, stupid”, as the old James Carville quip goes. So what is going wrong here?
A particular issue is inflation. The Biden team was slow to realise that while Bidenomics may be a success in terms of macroeconomic data, most Americans do not feel that. They notice double-digit increases in grocery or petrol prices over the past few years. They simply do not feel better off now than four years ago.
That is changing, but slowly. While wage increases have trailed inflation, real earnings are finally beginning to rise. What’s more, consumer sentiment is a trailing indicator, and some estimates show that it can take up to a year for inflation-shocked consumers to feel more optimistic in the face of good data. Biden officials are counting on continued improvement into the second half of 2024, making it impossible to deny the strength of the economy.
But politics in the US, as in many places, are increasingly less about data and more about polarisation. Far more Democrats than Republicans will say, when polled, that they believe the economy is doing well. This gap has been increasing since the 1990s, fuelled in no small part by the rise of partisan cable news and social media. Indeed, the administration is convinced that social media disinformation about the economy is affecting voters’ sentiment.
Biden is facing other impediments, including some of his own making. An increasing number of voters, including in his own party, believe he is too old for the job at 81. That problem is exacerbated by the weakness and lack of political appeal of Kamala Harris as vice-president. The war in Gaza has also hurt Biden, raising the risk that young Democrats, upset by US support for Israel and the Netanyahu government’s devastation of Gaza following the October 7 massacre of Israelis by Hamas, may vote for a third-party candidate or not vote at all.
The Biden team expects these hurdles will seem less formidable by later this year, assuming the Gaza war subsides, inflation falls, the job market remains robust and a massive advertising campaign pays off. But a lot has to go right for public sentiment to shift. Things could still go the other way if there is further disruption to oil supplies in the Middle East, or a big market correction.
Former president Barack Obama recently criticised the Biden administration for running its re-election campaign out of the White House, rather than taking a more grassroots approach. Certainly, if it is to combat the highly effective, if often disingenuous, messaging of the Trump campaign, the Biden team needs to spend more time outside the Beltway. As well as highlighting the real perils to US democracy of a Trump return, it needs to show more energy in its campaign and vigour and imagination in how it intends to address ordinary voters’ concerns. The future of not only the Biden presidency but US leadership in the world depends on it.
