In the clash between macro statistics and micro realities, Biden is losing.
Despite administration and establishment media drumbeats, Americans aren’t buying Biden’s economic elitism.
Facing Biden’s inflation over three years, Americans first consumed their savings and then began borrowing to keep pace. Now, high interest rates compound their price problem — even as touted economic growth slows.
In the clash between macro statistics and micro realities, Biden is losing.
Listening to “experts,” America’s economy is great. Biden trumpeted it in this year’s State of the Union: “I inherited an economy that was on the brink. Now our economy is the envy of the world! 15 million new jobs in just three years — that's a record! Unemployment at 50-year lows.”
Paul Krugman’s recent New York Times piece concluded that pitted against his predecessor on the economy, “the answer is almost ludicrously favorable to President Biden.”
So, why is Biden rated so poorly on the economy? According to Real Clear Politics Biden’s approval rating on the economy is 39.5 percent versus 58.1 percent disapproval — slightly worse than his overall 39.7 percent-56.4 percent approval rating.
To find the answer, look no further than inflation and interest rates: Together their micro impacts undermine macro statistics.
Biden has spent profligately and inflation has responded accordingly. Using Congressional Budget Office estimates, Biden will have spent $7.9 trillion above 2019’s pre-pandemic outlay level, run $7.4 trillion in deficits and raised federal debt to $27.9 trillion (99 percent of GDP).
Inflation has followed. Registering just 1.4 percent on the Consumer Price Index for All Urban Consumers when Biden was inaugurated, it was 5.4 percent that June and then 7 percent that December; in June 2022, it was 9.1 percent — a 41-year high.
The effect on consumers has been devastating. According to the Committee to Unleash Prosperity, during Biden’s first three years in office, these are the net price increases: groceries (21.1 percent), energy (32.3 percent), gas (34.6 percent) and rent (19.5 percent).
To meet these dramatically increased costs, Americans spent their pandemic savings. According to the Federal Reserve Bank of San Francisco, Americans started draining those savings from a $2.1 trillion peak in August 2021 — just as inflation was in its fifth month of 5 percent-plus increases. As of March 2024, those savings are gone, and Americans are $72 billion below their pre-pandemic level.
As savings were exhausted, Americans borrowed — again, following Biden’s inflation. According to the New York Federal Reserve Bank, in the first quarter of 2021, America’s non-housing debt stood at $4.15 trillion; by the fourth quarter of 2023, it was $4.89 trillion. At the same time, credit card debt hit a new record of $1.13 trillion in 2023’s fourth quarter.
Parallel to savings’ depletion and borrowing’s increase, interest rates rose. To address Biden’s inflation, the Federal Reserve was forced to raise rates 11 times, from effectively 0 percent to 5.25-5.50 percent — a two-decade high — over just two years.
Squeezed in an inflation-interest rate vise, Americans are paying higher prices and higher interest on their borrowing to pay those prices. Again, the effect follows Biden’s inflation.
Average annual percentage rates on accounts assessed interest and the average prime rate both leaped after 2021: APRs jumped from 16.4 percent to 22.8 percent in 2023 (the highest level ever recorded), while the prime rate went from 3.3 percent to 8.5 percent. So, as Americans are forced to borrow more, they’re paying far more for it.
Nowhere has the inflation-debt-interest snare been tighter on Americans than homeownership. High inflation makes homeownership an attractive hedge. So, many hedged, and housing debt spiked, going from $10.5 trillion in the first quarter of 2021 to $12.61 trillion in 2023’s fourth quarter.
Simultaneously, high-interest costs jolted mortgage rates, taking the 30-year fixed rate mortgage average from 2.77 percent in January 2021 to 7.22 percent today — making mortgage payments surge 66.5 percent during Biden’s presidency. Nor does this count the loss of those priced out of homeownership.
To these pressures, administration experts and apologists explained inflation and interest rates would be temporary and macroeconomic growth would make Americans whole. But inflation, and therefore interest rates, have not cooperated: Inflation has stayed above the Fed’s 2 percent target for 37 straight months and increased in each of the last three.
Simultaneously, the economy has slowed: falling to just 1.6 percent real growth in the first quarter of this year, its third quarterly drop and its lowest level since contracting in the first and second quarters of 2022.
Maybe Americans hear the administration’s macro numbers, but they see the micro ones. Daily. They live them. And, as a result, U.S. household debt is at an all-time high of $17.3 trillion — even as credit card interest rates are at their highest level in Federal Reserve Bank of St Louis’ records and 30-year fixed mortgage rates over the last year at their highest since 2000.
Biden claims to understand average Americans; in his State of The Union, he emphasized “I grew up in a home where not a lot trickled down on my Dad’s kitchen table.” Insisting on the macro makes him seem detached and his administration even more elitist.
In a debate between the Oval Office and the kitchen table, Biden loses.
J.T. Young was a professional staffer in the House and Senate from 1987-2000, served in the Department of Treasury and Office of Management and Budget from 2001-2004, and was director of government relations for a Fortune 20 company from 2004-2023.
