Redburn Reads, Feb. 5 (U.S. Prosperity edition)
Friends,
Many people remain dissatisfied, but it’s time to admit what has been obvious for quite some time: the U.S. economy is delivering more prosperity to more Americans than at almost anytime in my lifetime (73 years!).
Perhaps the only comparable periods were the late 1990’s in the midst of the Clinton-era tech boom driven by the expansion of the Internet, and the mid–to-late 1960s, after the Kennedy-Johnson tax cuts of 1964 and before a combination of Vietnam War and Great Society spending forced the government to raise interest rates and taxes to try to restrain inflation.
We’re still living in an era of deep inequality, of course, ushered in by profound changes in the global economy and the neo-liberal policies initiated during Ronald Reagan’s presidency. But the tight labor market of recent years has helped narrow the gap, as workers in the bottom half of the income ladder have made outsized gains, while the growing strength of labor unions has also lifted the fortunes of blue collar industrial workers, even those not unionized as employers raise wages to compete.
All in all, despite ongoing problems with expensive housing and health care costs, Americans are doing so well heading into this election year that the economy should provide plenty of support for the incumbent president despite the rose-colored contentions of his far less successful predecessor.
Writing in The Washington Monthly, Robert. J. Shapiro lays out the undeniable comparison between the economic performances of Joe Biden and Donald Trump.
Donald Trump’s prospects for a second presidential term may well rest on whether voters accept his proposition that facts no longer matter. A case in point is his narrative that the economy was stronger during his presidency than under President Joe Biden. With few reality checks from the economic media, most of the public apparently agrees: One recent survey found that voters prefer Trump over Biden on the economy by 59 percent to 37 percent.
As Trump closes in on his third GOP presidential nomination, it’s time to set the record straight: By virtually every measure, that narrative is patently false.
From growth and jobs to investment and business creation, the economy has performed substantially better under Biden than it did under Trump. Biden’s superior record holds even if we set aside the pandemic’s impact in 2020. The exception, of course, is inflation. But just as the COVID-19 pandemic led to the collapse in GDP and employment during Trump’s last year in office, it was also the main reason prices rose so much for a time here and globally, according to new analysis from the Federal Reserve. . .
Based on spending, consumers also prefer Biden’s economy. From 2021 to 2023, real personal expenditures increased an average of 4.5 percent per year, versus Trump’s record of 2.6 percent from 2017 to 2020. In this case, a pandemic pass for Trump increases Biden’s advantage: Real consumer spending grew 2.0 percent per year from 2017 to 2019, an annual rate that trails Biden by 55 percent.
On employment—on top of growth, investment, and consumer spending—Biden puts Trump’s record to shame. The Bureau of Labor Statistics (BLS) reports that since Biden became president, the number of Americans with jobs has increased by 14.3 million—versus a net loss of 2.7 million over Trump’s term, the first decline since Herbert Hoover.
There’s a reasonable argument that a more accurate picture of job creation under Trump and Biden should set aside the collapse in employment during the early pandemic and the bounce back from that collapse in 2021. Even so, Biden beats Trump handily. Under Biden, from January 2022 to December 2023, employment grew at an average annual rate of 2.4 percent compared to a 1.5 percent rate under Trump from January 2017 to February 2020. That’s another Biden win, this time by a margin of 60 percent. . .
Far from mismanaging inflation, Biden tamed it. [Though I’d give more credit to Fed chairman Jerome Powell for that.] As a result, America has fared better than other advanced countries. In 2023, while U.S. consumer prices rose 3.3 percent, they increased 4.1 percent in France, 3.9 percent in Great Britain, and 3.7 percent in Germany. And we beat inflation without sacrificing growth: In 2023, real GDP grew 2.5 percent in the United States compared to growth rates of 1.0 percent in France, 0.5 percent in the United Kingdom, and negative 0.5 percent in Germany.
I’ve been a pushover for data ever since I oversaw the Bureau of Economic Analysis and Census Bureau as the Under Secretary of Commerce in the late 1990s. But politicians and the press must also take real economic numbers seriously. It’s time to reframe the narrative based on data that rigorously tracks what happens in the economy and not on mythmaking. President Biden’s record not only eclipses Donald Trump’s, but when policy made a difference—on growth, employment, investment, and inflation—Biden stepped up and improved our economic conditions. Those are the facts.
Fortunately, the narrative of the so-called “viberecession” is changing as public perceptions are catching up with reality. The latest jobs report even seems to have chastened fools like former Trump adviser Larry Kudlow, who still pontificates on Fox News and CNBC despite his abysmal record as both an economic policymaker and forecaster.
“I was wrong about the recession,” Kudlow said on Friday after the monthly employment report estimated the economy added over 350,000 jobs in January, job gains for all of 2023 were revised up by more than 300,000 to a total of 3 million, and the jobless rate remained at a very low 3.7 percent. “Everybody was wrong.” [Not true!]
After a long string of coverage emphasizing problems like inflation, high interest rates, and the threat of recession, reporting in The New York Times also shifted markedly on Friday, with three separate pieces painting a positive picture of the American economy.
Jim Tankersley, one of the most perceptive economic reporters in the country, was given the assignment of assessing the political impact of today’s sunny economy.
A run of strong economic data appears to have finally punctured consumers’ sour mood about the U.S. economy, blasting away recession fears and potentially aiding President Biden in his re-election campaign.
Mr. Biden has struggled to sell voters on the positive signs in the economy under his watch, including rapid job gains, low unemployment and the fastest rebound in economic growth from the pandemic recession of any wealthy country.
For much of Mr. Biden’s term, forecasters warned of imminent recession. Consumers remained glum, and voters told pollsters they were angry with the president for the other big economic development of his tenure: a surge of inflation that peaked in 2022, with the fastest rate of price growth in four decades.
Much of that narrative appears to be changing. After lagging price growth early in Mr. Biden’s term, wages are now rising faster than inflation. The economy grew 3.1 percent from the end of 2022 to the end of 2023, defying expectations, including robust growth at the end of the year. The inflation rate is falling toward historically normal levels. U.S. stock markets are recording record highs.
The Federal Reserve, which sharply raised interest rates to tame price growth, signaled this week that it was likely to start cutting rates soon. “This is a good economy,” Jerome H. Powell, the Fed chair, whose central bank is independent from the White House, declared at a news conference this week. . .
“Today’s report is another in a long line of expectation-busting gains on behalf of working Americans,” Jared Bernstein, the chairman of the White House Council of Economic Advisers, said in an email on Friday. “And with easing inflation, we’ve got wages handily beating prices, meaning more buying power. Importantly, confidence measures, including a 13 percent surge in January from the UMich survey, suggest that people are reliably starting to feel these gains.”. . .
The narrative shift is also evident in the way Mr. Biden’s critics talk about the economy. Some have resorted to scouring recent data for any sign of weakness.
Alfredo Ortiz, the president and chief executive of the Job Creators Network, a conservative advocacy group, said on Friday that the jobs report was “not the home run that Democrats and the mainstream media claim.” He noted that “employment actually declined last month in the mining, quarrying, and oil and gas extraction industry. This economic sector lubricates the American economy and provides jobs to support a family on.”
Former President Donald J. Trump has gone further, suggesting that large recent stock market gains are a result of investors believing he will defeat Mr. Biden in November and return to office — a theory that few, if any, Wall Street economists endorse.
When asked on Fox Business Network on Friday why stocks were rising if the economy was bad under Mr. Biden, Mr. Trump replied, “Because they think I’m going to be elected.”
That’s looking less likely these days.
Take care,
Tom
P.S. I just returned from an incredible trip to Kenya with Lisa, her sister and her partner and her two cousins. Entering the wilds, even for a short time, where animals rule and we are just visitors provides a welcome perspective on our crazy lives and reminded me of just how fortunate we are to be able to experience the many wonders of our Earth.
