WASHINGTON, DC (CNN — President Joe Biden on Wednesday formally unveiled “Bidenomics,” the ground-up economic philosophy he claims serves as the driving force behind the US economy’s success.
When an economy grows “from the middle out and the bottom up instead of just the top down… everybody does well,” Biden said in a speech from Chicago.
But the economy’s track record under Biden is anything but flawless. And while Biden’s growing list of Republican challengers differ on many issues, when it comes to the economy, they’re in agreement that Biden failed.
In reality, it’s a mixed bag.
Americans have grappled with inflationfor more than a year, including a painstaking issue with housing affordability as the Federal Reserve raised interest rates 10 times in a row to bring that inflation down.
In addition, a tight labor market has left many small businesses with ongoing hiring difficulties. Meanwhile, in anticipation of a recession, large companies have tightened their belts and resized their workforce by laying off thousands of workers.
But it hasn’t all been bad. American workers have rejoiced in a robust labor market that has allowed them to quit their jobs for a better one — one that can pay them more or allow them the flexibility of working from home.
Many Americans were given a financial boost during the Covid pandemic in the form of stimulus checks and a break from student loan payments, although the latter are restarting later this year.
The economy evolved immensely during and after the pandemic. Here’s what Biden can take credit for – and what he can’t.
Fiscal largesse
Some major spending packages passed by Congress did happen under Biden’s watch — from the American Rescue Plan to the Inflation Reduction Act — funneling trillions of dollars toward infrastructure, workforce development, state and local governments and the costly public health response to Covid.
While government spending bolsters consumer demand, it also boosts business investment. Manufacturers’ spending on construction has soared in recent months due to funding Congress approved for infrastructure.
The Treasury Department released an analysis this week that showed the increase in construction spending from manufacturers has been “principally driven by construction for computer, electronic, and electrical manufacturing” and that “the surge appears to be uniquely American — not mirrored in other advanced economies.”
Biden can claim credit for that, but until manufacturers begin to hire workers at a solid clip, it’s hard for Biden to declare there’s a manufacturing boom.
For now, demand for goods has slowed in the United States and other major economies, according to business surveys from S&P Global and the Institute for Supply Management.
In other aspects, the labor market certainly had a boost from Biden’s fiscal policies. The American Rescue plan provided $40 billion toward workforce development, funneled through state and local governments, which aimed to address demographic disparities and invested in the public health workforce.
Still, the economic outlook remains uncertain. While Biden joked Wednesday that he has heard people “forecast the possibility of a recession for 24 months, and it hasn’t happened,” Federal Reserve Chair Jerome Powell said at a central banker panel Wednesday he is not ruling out a recession. However, some economists and bank CEOs think a recession could come later than expected.
Plentiful jobs and record-low unemployment — but not all thanks to Biden
Since Biden took office in January 2021, the unemployment rate has plunged to 3.7% from 6.3%. All the jobs that were lost due to the pandemic-induced recession were fully restored last summer. Since then, the American workforce has consistently outpaced the pre-pandemic workforce.
However, the labor market had begun to make a comeback well before Biden’s inauguration. Many of the job gains during his presidency were likely a continuation of the bounce-back effect that came as the economy reopened.
Americans are also earning more. Since Biden became president, average hourly earnings have risen by 12% to $33.44, according to the Bureau of Labor Statistics, although that is also connected to the pace of post-pandemic recovery.
And, as Biden pointed out Wednesday, several polls indicate job satisfaction is at a record high.
That said, the labor market is unbalanced.
There are almost 4 million more job openings than the number of people looking for work. That has forced employers to raise wages to lure in more workers.
Biden sees that as a victory. “Pay for low-wage workers is growing at the fastest pace in over two decades,” he said Wednesday.
However, the Fed is less gung-ho about those wage increases, since they’re feeding directly into inflation.
Is Biden to blame for inflation?
Republicans have repeatedly slammed Biden for decades-high inflation, decrying it as the consequence of out-of-control government spending. The causes of inflation are nuanced, but a faction of economists and analysts argue that generous government spending played some role.
Ben Bernanke, the former Fed chair who helmed the central bank during the Great Recession, and Olivier Blanchard, a former chief economist at the International Monetary Fund, argued in a paper presented at the Brookings Institution in May that inflation’s eruption was first driven by shortages and energy prices.
But the two economists asserted that inflation continued to rise because of stimulus-fueled demand and low interest rates.
Although the spending packages passed under Biden are not the main culprits behind inflation – war in Ukraine and the pandemic played a huge part – government spending did play some role. It’s just no longer a source of inflation.
“I will add, though, without crossing any lines, that the spending during the pandemic was very high and it’s come down — and so we look at the fiscal impulse from the level of spending and it’s really not material. It may even be slightly contraction, but let’s just say it’s flat,” said Fed Chair Jerome Powell Wednesday during a panel hosted by the European Central Bank. “If you look at where the inflation is in the economy, I wouldn’t say that that’s an important driver of inflation or something that we think about or consider.”
Inflation has in fact retreated from the four-decade high in June 2022, in large part due to falling energy prices, but Bernanke’s paper argued that the economy needs to slow further to address the labor market’s persistent impact on inflation.
Biden’s response to the inflation criticism is that it’s worse in other major economies.
Americans are in more debt than ever
Whether or not Biden is to blame for inflation, it’s undeniable that it has created financial hardships for Americans.
Household debt is at a $17 trillion record high, according to data from the Federal Reserve Bank of New York.
That’s a 16% increase from when Biden took office.
Americans are piling on debt and struggling to make loan repayments on time as inflation continues to erode the value of their paychecks.
It’s clear that Americans have been remarkably resilient in the face of high inflation, punishing rate hikes, persistent housing unaffordability, economic uncertainty and an unforgiving pandemic that upended every facet of society. Biden should be given credit whenever it is due, but so should everyday Americans.
