The US economy has done better than anyone would have thought over the past year in terms of economic output, labour market resilience and slowing inflation. Indeed, a recent US Treasury analysis of IMF data suggests it has done better than any of its international peers. A good chunk of this is down to the Biden administration’s post-pandemic bailout of consumers, who have continued spending, and the “new supply side” fiscal stimulus that has gone into supporting construction and manufacturing.
Yet the president has seen little upside in terms of voter sentiment. Joe Biden ended 2023 with a 39 per cent job approval rating, according to Gallup polling, and his approval among even Democrats has ticked down. He trails Donald Trump in most polls. Elections are supposed to be about “the economy, stupid”, as the old James Carville quip goes. So what is going wrong here?
A particular issue is inflation. The Biden team was slow to realise that while Bidenomics may be a success in terms of macroeconomic data, most Americans do not feel that. They notice double-digit increases in grocery or petrol prices over the past few years. They simply do not feel better off now than four years ago.