President Biden is campaigning on four more years of yummy stew. A lot of voters are saying, “I like you, but I don’t like your stew.”
The performance of the U.S. economy should be a winning issue for Biden. I don’t know what the next half year holds in store, but as of now, unemployment is low and inflation, while still elevated, is way down from its 2021 peak. Economic growth is so strong that the Federal Reserve is putting off plans to lower interest rates.
Biden can’t credibly promise to turn things around — to make things much better in the coming term — because they’re already good by standard measures.
It’s just that many voters don’t see it that way. As I blogged on Monday, only 20 percent of likely voters in a survey by The New York Times and Siena College strongly approve of Biden’s handling of the economy as president, while 45 percent strongly approve of Donald Trump’s handling of the economy when he was president. Half rate current economic conditions as “poor.”
I asked people in the Biden White House and in Biden’s campaign as well as outside experts what Americans can expect on economic policy if he wins a second term. The short answer: more of the same. That’s encapsulated in the campaign’s slogan, “Finish the job.”
The biggest difference is that there most likely won’t be a pandemic to fight. The second-biggest difference is that the building blocks of Biden’s pro-worker industrial policy agenda are already in place. The emphasis in a second term would be on the executive branch carrying out that agenda while attempting to get federal budget deficits back under control.
In a campaign speech on Tuesday in his hometown, Scranton, Pa., Biden acknowledged that the economy isn’t working for everybody, but he turned it into a jab at Trump by saying someone complained to him he was drowning in debt. “I said, ‘I’m sorry, Donald, but I can’t help you,’” Biden joked.
There’s a lot we don’t know about how the economy might perform in a second Biden term. There could be a recession, which would cause more red ink (more government spending and lower tax revenue). Congress could reject his initiatives. Trading partners could push back against his economic nationalism.
Biden’s plan continues to adopt the priorities of the progressive wing of the Democratic Party, with some exceptions. He’s fully adopted the left’s argument that corporate greed is a major factor in high inflation. So if re-elected he’ll continue to try to rein in corporate power through antitrust lawsuits and other measures.
He’ll seek to increase taxes on the rich and spending on the poor, including by restoring the pandemic-era expansion of the child tax credit. He’ll continue trying to forge a coalition between the labor and environmental movements by pushing for well-paying, unionized jobs in manufacturing and installation of green technologies.
One of the few objectives that he shares, approximately, with Trump is to reduce America’s dependence on imports from China. His industrial policy — embracing infrastructure, chips and clean tech — is politically centrist, says Brian Deese, an innovation fellow at the Massachusetts Institute of Technology who directed the National Economic Council during Biden’s first two years in office.
On taxes, he is sticking to his promise not to raise them for people earning under $400,000 a year. That’s a political winner, but declaring such a big swath of the national income off limits makes it hard to reduce the big federal budget deficits. One way he does want to shrink deficits is by raising the corporate income tax rate to 28 percent. That would be well above the 21 percent set by the Tax Cuts and Jobs Act of 2017, which was Trump’s signature achievement, but still below the 35 percent rate that prevailed before 2017. He also wants to restore the top marginal tax rate on people to 39.6 percent (up from 37 percent currently) and apply it to individuals earning $400,000 or more a year.
Tax rates go up and down, of course. More unusual is Biden’s plan to try to tax unrealized capital gains. That’s the money you’ve made on paper when an asset you own goes up in value but you haven’t sold it yet. Biden wants to put a minimum 25 percent tax on income plus unrealized capital gains for households worth $100 million or more. Biden calls that his billionaire minimum income tax.
In his State of the Union address in March, Biden repeated his claim that the average federal tax rate for billionaires is 8.2 percent, which he said is “far less than the vast majority of Americans pay.” He cited that figure again in Scranton on Tuesday (although he made it “8.3”).
That’s an apples-to-oranges comparison, though. The rate for billionaires is as low as 8.2 percent only if you include unrealized capital gains in their income. Going by income as conventionally measured, the top 400 families by income paid a 23 percent rate in 2014, the last year for which the Internal Revenue Service released data.
On trade, Biden is far less extreme than Trump, who expressed interest last year in a 10 percent tariff on almost all imports and, according to The Washington Post, has talked with aides about the possibility of a special 60 percent tariff on imports from China.
But Biden is also going after China pretty hard. On Wednesday, the White House announced that Biden would ask his trade representative to more than triple tariffs on some steel and aluminum products from China. Biden has also toughened “Buy American” government procurement policies and is using subsidies to bolster the domestic clean energy sector.
When economists try to predict how the economy would fare in a second Biden term, they assume no drastic change in policies. In other words, it’s the base-line forecast, which is for a gradual decline in inflation and modest but steady economic growth. Pretty good, actually, especially in comparison with predictions for another Trump term, which I plan to write about on Friday.
Like a lot of people, I’m still trying to figure out why voters are so down on Biden’s economic record. I watched the telecast of his speech in Scranton on Tuesday for clues. I think a lot of voters think Biden looks old and doddering, so they conclude that he can’t possibly be a good economic manager. That would be consistent with a Gallup poll conducted in March that found that Biden swamps Trump on likability, honesty and trustworthiness, but trails him on strength, decisiveness and the ability to manage the government effectively.
That’s a high hurdle for the Biden campaign to overcome because it’s scarcely affected by actual data on economic performance.
Elsewhere: The Mental Health of Young Adults Has Deteriorated
Ill-being is the opposite of well-being. It used to be hump-shaped: low among carefree young adults and the contented elderly, highest in unhappy middle age. But the hump has disappeared, for unfortunate reasons, according to new research. Ill-being is now highest among young adults and then steadily declines, according to a working paper by David Blanchflower of Dartmouth College and the University of Glasgow, Alex Bryson of University College London and Xiaowei Xu of the Institute for Fiscal Studies in London.
Rates of depression, despair, economic inactivity and suicide have risen sharply among young adults. The authors point to “a growing body of evidence suggesting that the rise in ill-being of the young is associated with the rise in the use of the internet and smartphones.” One study they cite found that the proportion of young women spending at least five hours a day on internet screens rose to 43 percent in 2021 from 10 percent in 2011.
Quote of the Day
“Between and among the restaurants you can buy rare coins, old jewelry, old or new books, very nice shoes, art supplies, remarkably elaborate hats, flowers, gourmet foods, health foods, imported chocolates. You can buy or sell thrice-worn Dior dresses and last year’s minks, or rent an English sports car.”
— Jane Jacobs, “The Death and Life of Great American Cities” (1961)