In this final edition of the Brief, we’re getting into the state of Bidenomics: What impact has the policy agenda had thus far? Has it succeeded at rebalancing power in the economy toward working people? And what do Americans' perceptions of the economy at this point tell us about their attitudes toward the new paradigm of economic thinking?
As we close out the year, we’ll be sunsetting the Brief and will come back to you in the new year with fresh analysis and insights from our sister organization, Roosevelt Forward.
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The new economics, so far
As we wrap up the year for the Brief, we wanted to take stock of the state of Bidenomics.
The new economics is premised on the idea that growing the economy from the bottom up and middle out will produce better results for most people than the bipartisan era of trickle-down economics. While the transition from the neoliberal era is a long-term proposition, the recent results of a policy agenda that aims to rebalance power in favor of working people have been clear. Let’s take a look:
Job creation and unemployment: Bidenomics has achieved a lower unemployment rate than many neoliberal economists thought was possible. In January 2021, the unemployment rate was 6.3 percent. Today, the unemployment rate is 3.7 percent, and has been under 4 percent for much of the past year. At times this year, the unemployment rate was the lowest it's been in 50 years.
Real wages: According to a new study released by the Treasury Department, real wages have grown since before the pandemic across the income distribution. As would befit an agenda that’s “bottom-up and middle-out,” real wages for the bottom 25 percent of wage earners increased by 3.2 percent since the end of 2019, while those in the 50th percentile have grown by 1.7 percent. The US is the only G7 nation to experience real wage growth since the end of 2019.
Inflation and growth: While prices are still higher than when President Biden took office, inflation has plummeted in little over a year from a troubling 9.1 percent to 3.2 percent. Meanwhile, economic growth increased at an annual rate of 5.2 percent in the third quarter of 2023. As previously covered in the Brief, the Fed and the Biden administration seem to have engineered the kind of soft landing for the economy that many leading neoliberal economists said was impossible.
Meanwhile, the hot labor market has contributed to a revival of the labor movement’s power to strike, organize new workers, and collectively bargain for union contracts. Historic public investments in the clean energy, microprocessor, and manufacturing sectors have led to significant private investment, leading to new jobs and future growth. The revival of strong antitrust measures has led to lawsuits against tech giants Google, Amazon, Meta, and Microsoft, and a raft of significant changes at agencies across the government which aim to take on corporate consolidation and monopoly control.
It’s not quite the inauguration of a new, pro-worker economic order, and there’s more to be done, but it’s strong evidence that policies designed to create such an order could actually work.
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Vibes are off?
While this new approach to economic governance already has resulted in some real, significant wins, the American public still remains remarkably sour about the current state of the economy. Although consumer sentiment has recovered somewhat in December, it’s still significantly lower than it was before the pandemic. In November, Gallup’s economic confidence index was the lowest it's been since the 2008 recession. Fifty percent of Americans rated the economy as “poor” and another 31 percent as “only fair,” while 72 percent of Americans said they thought economic conditions were getting worse. A recent poll by Bankrate found that 50 percent of US adults say their overall financial situation is worse than it was in November 2020.
What accounts for this unprecedented divergence between Americans' negative views on the economy and the strong economic fundamentals? There are many theories that have been put forward on why perceptions remain so negative:
- Perception of the economy is a lagging indicator: In this view, the pandemic-era recession and inflation of 2022 are still dominant in people’s minds. As time goes forward, and the recession and inflation are further in the rearview mirror, more Americans will come to appreciate the ways the new approach to economics has changed the economy for the better.
- Partisanship prevails: In this view, the partisan divide on the economy is simply the result of people who don’t like Joe Biden saying the economy is bad because they don’t like Joe Biden. An analysis by Briefing Book found that accounting for excess partisanship closes 30 percent of the gap between predicted and observed economic sentiment—a significant figure, but one which leaves a great deal unexplained.
- It’s not the economy (stupid): The gap between perception and reality on the economy emerged after 2020. In this view, the divergence is caused by people’s experience of the pandemic. As David Wallace-Wells says in the Times, “It is probably worth considering, alongside the economic factors, the way that vibes of widespread social dislocation, illness and death have contributed [to this divergence].”
- It's inflation (stupid): In this view, most of the concern about “the economy” amounts to concern about raising prices. In poll after poll, Americans say they’re deeply concerned about rising prices and worried about the impact on their bottom line. Higher prices at the grocery store or gas pump have been a shock for most Americans who were already struggling to get by.
- The cost of living crisis is very real: In September, a Bank of America survey found 67 percent of employees say the cost of living is outpacing growth in their salary and wages. While fuel and food costs have slowed, they’re still higher than before the pandemic. Meanwhile, housing costs have increased, borrowing money is more expensive, and nothing’s been done to tackle the high cost of health care, education, childcare, or elder care.
How should we think about this divergence in the context of the shift from trickle-down to bottom-up economics? Do Americans not like the bottom-up approach? Or do they just not see it yet?
There certainly seems to be some truth to each of these prevailing theories. Some of the benefits we describe in the Bidenomics Brief are abstract; economic growth and increased private investment do make a real difference, but paying more for eggs and gas is a weekly reality check. What’s more, the legislation and executive orders which constitute the bulk of Bidenomics affect the vast majority of Americans either indirectly or in ways that are not obviously visible, which research tells us matters for how people experience it. And, of course, the benefits that Build Back Better would have delivered directly into people’s lives didn’t pass into law. These benefits—including lower childcare and elder care costs, free community college, and the expanded child tax credit—would have addressed many of the pain points most Americans are experiencing with the economy. So the new approach to economics has in part, and like so much else, hit the limits of what our political system can deliver—and Americans are feeling, and responding to, the results.
During the pandemic, many Americans experienced what it really means to live in an economy where workers' lives are expendable, the health care system is designed for profit, not saving lives, and the safety net is only as strong as your finances. The new approach to economics has succeeded at returning the economy to its prepandemic normal, but it has only barely begun to fix the cracks in our society that the pandemic revealed.
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- In The New Republic, Steven Greenhouse writes about how corporations like Trader Joe’s are doing everything they can to delay agreeing to their first union contract.
- In the Atlantic, Annie Lowrey writes about the Biden administration’s woeful housing policy, and how it’s failing to respond to the housing crisis.
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As you know by now, we close every week with a quote from either President Biden or FDR. Hit reply to this email to let us know your guesses for who said this week’s quote. If you guessed last week’s quote was from FDR, you were right! It came from his famous “forgotten man” speech from April 7, 1932.
Now for this week’s quote:
“For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor—other people's lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.
Against economic tyranny such as this, the American citizen could appeal only to the organized power of government.”
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