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Like all specialist fields, macroeconomics produces its own abstruse jargon. (The Chinese edition of the Encyclopedic Dictionary of Macroeconomics runs to nearly 700 pages.) There are three terms in particular that come to mind when we think about the US economy under president Joe Biden—and that will matter aplenty when the electorate considers his second bid for the presidency next year.
Biden has earned some bragging rights. Under his stewardship, the US has enjoyed one of the strongest recoveries out of all the G7 countries coming out of the pandemic. The US economy is humming along at near-full employment: The overall unemployment rate is 3.5%, and the rate for Black Americans fell to a record low of 5% in March.
His critics might say that inflation is Biden’s biggest failure. But the US inflation rate has dropped, from nearly 9% last June to 5% today—and it has happened without a recession resulting thus far, despite the Federal Reserve’s adamant interest rate hikes. Besides, dozens of countries around the world experienced similar levels of inflation, a clear consequence of people getting ready to spend for products and services that were difficult to provide as the globe emerged from the damage of covid-19. As it turns out, switching the global economy off and then on is much harder than most experts thought it would be.
Which brings us to the first of our three terms. The pandemic created what are called sectoral imbalances, meaning that various sectors in the global economy suffered from shortages of one thing or another, and so couldn’t make enough. What is vastly misunderstood, however, is that the recovery relies not just on restoring the production flow of the item being manufactured (“production flow” being the second of our terms) but also on restoring stocks of the item to make up for two years of underproduction. That takes time—and while those shortages last, inflation persists.
The latter half of Biden’s economic agenda has been focused on this part of the economy: the make-it-possible-to-make-more-stuff part, or what economists like to call “productive capacity.” That is Term No. 3. The hundreds of billions of dollars from Biden’s infrastructure bill, CHIPS Act, and Inflation Reduction Act are all working their way through the economy now, and will continue to do so for the next couple of years.
None of this may stave off a recession; anything may happen in a year and a half, a lesson brought home only too painfully by the tumult of 2020-2022. But if, at the start of his presidency, Biden had been offered the current economic situation as a launchpad for a re-election bit, he likely would have taken it. And perhaps the American people would have, too.
BUT—AND THERE’S ALWAYS A BUT...
No economic record is spotless. And ironically, it is Biden’s core constituency of progressive Democrats who may have reasons to grumble about his policies.
One example: Biden has been unable to push through a powerful piece of welfare—an enhanced childcare tax credit. During the pandemic, parents were given monthly payments of up to $300 and tax credits of $3,600 per child, lifting millions of children out of poverty. The program lapsed in December 2021, reverting to the $2,000 tax credit that was the pre-pandemic maximum. Biden failed in convincing legislators to make the expanded program permanent in the wake of the pandemic, although he said in March that it remains on his agenda.
Additionally, Biden wasn’t able to get several initiatives through Congress related to caregiving for the elderly and disabled. These proposals were designed to free up workers to be able to do their jobs and function in society without the added weight of caregiving for a family member. Unfortunately, facilities like nursing homes continue to get worse, and Congress has ignored how effective caregiving policies could dramatically increase the number of workers in the labor force.
And while Biden’s industrial policy will result in many high-quality jobs, the president still failed to get some parts of his agenda passed: measures to strengthen unions, for instance, or to ensure a $15 federal minimum wage. To the dismay of environmentalists, he approved the Willow oil drilling project in Alaska, allowing ConocoPhillips to add the emissions equivalent of the entire country of Belgium to the atmosphere. In fact, in his first 25 months, the Biden administration approved nearly 6,800 oil drilling leases—more than Donald Trump did in the same period.
TWO BIG NUMBERS
154.8 million: The Congressional Budget Office’s prediction in January 2020—before covid, Ukraine, and inflation—of nonfarm employment in the first quarter of 2023
155.6 million: The actual nonfarm employment number as of March 2023
ONE 👀 THING
The phrase “It’s the economy, stupid!” owes its origins to Bill Clinton’s 1992 campaign, when one of his advisers urged the candidate to focus on his predecessor George Bush’s economic failings. But to advise a presidential hopeful to stick to economic facts is to suggest that the facts tell just one story—or indeed, as is acutely obvious in the 21st century, that there are such things as uncontested facts.
In a recent column, the economist Paul Krugman showed how even perspectives on the economy can differ sharply. “The venerable Michigan Survey still shows consumer sentiment at levels heretofore associated with severe economic crises,” Krugman wrote. “But the also well-established Conference Board survey—which, as it happens, has a much larger sample size—tells a different story: Its ‘present situation’ index is fairly high, roughly comparable to what it was in 2017.” And this isn’t even to get into the complication of how the economy feels different depending on your class, or race, or gender—or into social issues, such as the dramatic slide in women’s reproductive rights in the US. It isn’t just all about the economy, of course. But one may be justified in responding, to “It’s the economy, stupid,” with the question: “Whose economy?”
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Additional contributions by Julia Malleck and Samanth Subramanian