Dem
51
GOP
49
We now have ironclad proof that the economy is doing well: Donald Trump is claiming credit for it. Yesterday, he took to "Truth" Social to declare:
THIS IS THE TRUMP STOCK MARKET BECAUSE MY POLLS AGAINST BIDEN ARE SO GOOD THAT INVESTORS ARE PROJECTING THAT I WILL WIN, AND THAT WILL DRIVE THE MARKET UP
According to the staff chronicler, Trump ceased to be president 3 years and 10 days ago. And as you may recall, he spent much time during his first year in office crowing about how well the stock market was doing. Now, if this is still the Trump stock market, wouldn't that mean that the numbers he was crowing about in 2017 were being produced by... the Obama stock market? Guess we're not sophisticated enough about matters of high finance to understand how these things work.
More than 30 years ago, James Carville observed that "It's the economy, stupid." If that is still true, things may be looking up for Joe Biden, because the economy really is doing well. In fact, the U.S. economy is the best in the world now, beating the E.U., China, Japan, and certainly Russia. After the worst pandemic in a century and the worst inflation in decades, the economy has come roaring back. Inflation for the second half of 2023 dropped to the Fed's target level of 2% and unemployment is down to 3.4%, a near-record low since the late 1960s, except for a couple of months before the pandemic hit and 2 months in late 2000 as shown below.
In addition, the economy grew 3.1% during the past 12 months. Wages, corrected for inflation, are up 2.8% for the past 4 years. So we now have low inflation, low unemployment, economic growth, and real wage increases. The economic quadrifecta has been achieved during the Biden administration. As this begins to sink in and as memories of inflation begin to dim, the Republicans' argument that Biden messed up the economy are going to be increasingly difficult to make. It could take another 6 months to take hold, but if gas prices are the same in October as now, people are going to notice that inflation is gone. And if they don't, Biden is sure to remind them of it.
It is very plausible that inflation could indeed remain low in 2024. For Q4 2023, inflation was at 1.7%, which is below the Federal Reserve's target number. The drop over the last 12 months has only a few parallels in the last 100 years, once during World War II, once during the Korean War, and a couple of times during the 1980s. And in each of those cases, inflation stayed low for an extended period.
The post-pandemic recovery has flown in the face of everything economists thought they knew about the economy. Economists like to think of their subject like it is a hard science, but it is not. In physics, when a particle is at rest, E = mc², always. Not frequently, not most of the time, but all of the time. No exceptions. Economics is not like that. For 90 years, economists have thought that you can have low inflation or low unemployment but not both. Now we seem to have both. Time for new laws of economics. Time for Trump to legitimately take a bow for his genius in appointing Jerome Powell to run the Fed. It was a brilliant choice. Powell did the impossible. But Biden may end up getting the credit because good times occurred on his watch.
This is not to say that Biden bears no responsibility for the economy, however. Folks who have looked at the big picture, and have tried to figure out why the U.S. is leaving the rest of the world in the dust right now, have concluded that the key is the United States' COVID stimulus spending. Just as John Maynard Keynes predicted, increasing government spending when the economy is in a downturn sets things up for a more speedy recovery. Obviously, both Trump and Biden signed multiple trillions of COVID money into law, so they both get to take a bow here. Though again, no matter how much Trump tries to spin it otherwise, voters give nearly all the credit for economic ups, and all the blame for economic downs, to the president who is in the White House at the time.
Does the great economy mean Biden will get reelected? Not by itself, but a sizzling economy with real wage increases and low inflation certainly weakens one of the Republicans' strongest arguments. Now all Biden has to do is convince people that the economy really is good and it is not just a mirage. (V & Z)