The Worst Best Economy Ever

Joe Biden is, at the moment, losing his reelection campaign. And he is doing so while presiding over the strongest economy the United States has ever experienced.

The jobless rate is below 4 percent, as it has been for nearly two and a half years. Wage growth is moderating, but it is higher than it was at any point during the Obama administration; overall, Biden has overseen stronger pay increases than any president since Richard Nixon. Inflation has cooled off considerably, meaning that consumers’ purchasing power is strong.

Yet Biden’s approval rating is below 40 percent. His disapproval rating is 56 percent. Donald Trump is beating him handily in most key swing states. And there’s a chance that Trump might edge out Biden in the popular vote, particularly if he continues to expand his popularity with Black and Latino voters in blue and purple states.

This reality has engendered panic among many Democratic campaign operatives, and no small degree of dismay too. What does it mean if Biden can’t win a campaign as an incumbent in an economy like this—during an election in which most Americans say the economy is the most important issue to them?

Voters’ dissatisfaction with Biden and Biden’s economy seems to have two central components: Americans think less of the economy than the headline numbers suggest, and they are thinking less about the economy at all.

Indeed, the sunny numbers about the economy—the low jobless rate, strong wage growth, soaring wealth accumulation, and falling inequality—fail to account for some cloudier elements. Americans remain stressed by, and ticked off about, high interest rates and high prices. Homes and cars, in particular, are unaffordable, given the cost of borrowing and insurance. And inflation has moderated, but groceries and other household staples remain far more expensive than they were during the Trump administration.

The majority of Americans are better off because their incomes have grown faster than prices. But most people, understandably, think of their swelling bank account as a product of their own labor and price increases as a result of someone else’s greed. People want prices to come down. That’s not happening.

Americans also tend to say that even though they are personally doing well, the overall economy is doing poorly. Political scientists think this has to do with the news they are consuming, which tends to focus on the negative or to caveat good trends: Wage growth poses challenge for the Federal Reserve! Holding economic conditions constant, financial reporting has gotten more negative over the past four decades. This negativity gap was big during the end of the Trump administration, and it’s even bigger during the Biden administration. Social media puts a gloomy filter on the news too. Folks click on and share dire stories more than they do upbeat ones.

At the same time, American voters’ perception of the state of the economy has become heavily mediated by their partisan biases: Republicans tend to think the economy is a wreck if Democrats are in charge, and Democrats tend to think the economy is a disaster when Republicans are in the White House. That is dampening voters’ overall assessment of the economy right now. “The size of the partisan divide in expectations has completely dominated rational assessments of ongoing economic trends,” Joanne Hsu, the director of the University of Michigan’s surveys of consumers, has concluded.

Yet even many Democrats are not convinced that this is a good economy. In one recent poll, just 22 percent of self-identified liberals said they were better off now than they were a year ago. That’s perhaps because they’re all reading and watching those glum news reports. And it is perhaps because Democrats are clustered in coastal states battered by the cost-of-living crisis.

The direction of the economy seems to be a factor as well. At least some leading indicators are declining, pointing to a “fragile—even if not recessionary—outlook,” according to the Conference Board, a nonprofit think tank. Debt is rising; fewer building permits are being issued; in some states, unemployment is up. (California’s jobless rate has increased 0.8 percentage points in the past year.) “Economic indicators are not speaking with one voice,” John Sides, a political scientist at Vanderbilt University, told me. “Given the salience of inflation relative to other factors, it’s easy for the public to feel bad. It’s easy for reporters to write stories about bad things.”

Still, the stock market is booming. Millennials are catching up to Baby Boomers in wealth accumulation and homeownership rates. Low-wage workers are making huge income gains. In terms of growth, the United States is trouncing its high-income peers around the world. There’s a massive boom in new-business formation. Consumers, their grumbling about high prices aside, keep spending.

Yet voters don’t seem to care. The public’s perception of Biden’s economy has proved remarkably stable—even as prices have moderated, even as stocks have taken off, even as the unemployment rate has remained at historically low levels. That fits with research showing that voters pay more attention to downturns than to upturns: They seem more apt to punish a party in power if there is a recession than they are to reward a party in power for overseeing a boom. The economy might be less salient for voters when it is good than when it is bad.

The trend also fits with emerging political-science and polling literature showing that economic factors are weighing less heavily on voters’ assessment of the president. Gas prices used to be a good proxy for the public’s feelings about the performance of the White House. But there has been “hardly any association” for the past decade, Kyle Kondik at the University of Virginia’s Center for Politics has found. Similarly, presidential approval used to be strongly correlated with the consumer-sentiment index, the political scientist Lee Drutman has shown, but that stopped being the case back in 2004.

Why is the link between the economy and political sentiment fraying? Ironically, the dramatic improvement in material well-being over the past 50 years might be part of the answer: As countries get richer, voters have more latitude to vote their values, putting topics such as environmental protection, LGBTQ rights, and racial equality ahead of issues such as taxes, jobs, and wealth redistribution. This election cycle, voters might cite the economy as being the most important issue to them when talking to pollsters and journalists, but they may ultimately show up to vote (or change their vote) on the basis of another issue—abortion, say, or immigration.

Plus, American voters have become more partisan in recent decades—more likely to be immovably aligned with one party or another, and to see their political affiliation as a major component of their personal identity. Polarization “attenuates” the effect that the economy has on elections: Reliable Republicans just aren’t going to vote for Biden, and reliable Democrats just aren’t going to vote for Trump.

That leaves a sliver of persuadable voters. Drutman describes these folks as “disaffected from both parties, and mostly disengaged. They skew less wealthy, and younger, than the rest of the electorate. They defy easy ideological categorization. They vote sometimes, if they can be convinced the stakes are high enough to pay attention, or a new candidate breaks through and energizes them.” At the moment, neither candidate seems to be doing a great job of engaging those pivotal voters, many of whom don’t seem to like either of them.

A strong economy did not save Trump from becoming a one-term president. It might not save Biden either.