The truth about the Biden economy

It's best not to exaggerate in either direction

The American economy is in remarkably good shape, given the scale of the global economic disruptions during the Covid-19 pandemic and its aftermath.

That’s not just spin. If you compare the American economy to that of other rich countries, and you can see we are doing a lot better.

You can also compare the American economy in 2024 to the forecasts issued by the Congressional Budget Office in January of 2020. Real GDP — that’s with the inflation adjustment — is higher than they thought it would be. The biggest reason for that is that immigration has been higher than the CBO expected. But have those immigrants’ jobs come at the expense of Americans’ jobs? No. Before the pandemic, the CBO thought we would have a 4.4 percent unemployment rate this year and a 4.2 percent rate last year, and the actual numbers have been lower than that. They thought the prime-age labor force participation rate couldn’t break the 83 percent mark, but it has.

On the flip side, obviously inflation was greater than the CBO expected, and while inflation is now contained, that’s in part because interest rates are also higher than they thought they would be.

I think this is a good record, all things considered, because the pandemic did actually happen — production of certain things shut down for a while, patterns of consumption shifted around wildly, and all things considered you can’t address a problem like that at zero cost. And I’m glad that consumer sentiment popped a lot last week; it means the reality of the post-inflation economy is setting in. Last month, I scolded Debbie Downer Progressives who believe touting a glass half empty view of the economy will serve progressive causes, and I stand by that. But now that the mass public’s views are looking up, I do want to pull a slight hypocrisy and punch in the other direction.

When you do political messaging, you are trying to persuade swing voters, but in practice, your messages mostly persuade your own base. That’s just the way it works. So I think that as Democrats have talked up the Biden economy, they’ve talked their own elites into an excessively rosy picture of the situation.

That in turn is creating two distortions, one substantive and one political:

• The substantive distortion is the overstated idea that Biden has forged some glorious new path in which we have shed the dogmas of neoliberal economics and will march forward into a brave new future of industrial policy.

• The political distortion is the belief that if Biden loses, that loss will be totally unrelated to his objective domestic policy performance, and all of the lessons learned should be lessons about either the power of misinformation or else the perils of splitting your base over Israel.

The truth about the Biden economy is that it’s in remarkably good shape, given all that happened. But that’s not the same as saying that we are living through an unprecedented boom that the electorate is mysteriously failing to reward. Voters’ nostalgia for the economic conditions of the pre-pandemic era is perfectly reasonable.

The unreasonable part is believing that Donald Trump’s policies will bring it back.

The economy is fine

Something as complicated as “the economy” is hard to summarize, but if I had to pick one chart to summarize the recent economic evolution of the United States, I would take this one from Jason Furman that shows per person inflation-adjusted personal income.