It is quickly congealing into conventional wisdom that Joe Biden's big economic problem is not the current inflation rate, which is fairly moderate, but the fact that prices are still higher than they were a few years ago. People have memories of those lower prices, so they're unhappy with the current higher ones. It's only BLS nerds who care about the precise level of the Consumer Price Index for All Urban Consumers: All Items in U.S. City Average.
Fair enough, I suppose, except that prices never go down after an episode of inflation. In particular, here's a comparison of inflation now with inflation 40 years ago during the Reagan presidency:
These are both three-year periods that end in April of the election year. In Reagan's case, prices were 15.9% higher than they were 36 months before. In Biden's case they're 17.4% higher.
In other words, almost identical. But Reagan turned this into Morning in America, while Biden is suffering through a vibecession. Why the difference? I think there are two reasons:
- The media was far less partisan in Reagan's day. Today, Fox News and its allies have been relentless about focusing on high prices. This is why Republicans are far more unhappy about the economy than Democrats.
- Reagan's bout of inflation started under Jimmy Carter and the public didn't blame him for it. They just gave him credit for bringing it down. Conversely, our current epsisode of inflation started under Biden, so he's not getting much credit for bringing down something that people think was his fault to begin with.
That second item is obviously unfair: Biden had almost nothing to do with the inflationary spike in 2021-22. But life isn't fair. It happened on his watch, so it's his fault. He's just not going to get a lot of huzzahs for fixing his own problem.
This of course leads to the other conclusion I've been seeing on Twitter lately: if Trump wins, he'll get credit for fixing inflation *just by virtue of taking office*—clearly Americans perceive an inauguration as a price-level reset event.
There has always been inflation. Prices never go back down. The average price of a gallon of milk in 1957 was $1.00. In today's dollars that would be $31.67. (According to a converter chart I used.) So the price of goods has actually lagged far behind inflation over time.
I think you've got this right, but I'd also add that Bidens ideological allies on the left are not vociferously defending him.
Leftist activists don't like Biden anyway, and they are always complaining about how terrible the economy is no matter who is president, because Capitalism.
Technocratic liberal Democrats like myself are too quick to give 7 different explanations for what caused inflation and why it's not Biden's fault but maybe Biden made it worse but also it's bad everywhere else but also inflation is over now and also egg prices are caused by Avian flu and not Biden, et cetera et cetera et cetera.
I wasn't around at the time, but my guess is that Reagan's allies were doing nothing but singing his praises.
the inflation reduction act passed in august 2022, and inflation was around 8% at that time
i don't understand how the media blames inflation in august of 2022 on a law that wasn't even passed yet
There was an interesting segment on the online show, Breaking Points. Breaking Points had a chart of mean net worth, adjusted for inflation, three years in, for both the Trump and Biden terms. Bottom line, net worth adjusted for inflation, is slightly up (~ .7%) under Biden and was up 16% under Trump.
I suspect the aforementioned chart captures a lot of the economic unhappiness under Biden.
From the WSJ
"Though inflation is falling now, it has been higher on average under Biden than Trump. Adjusted for inflation, net worth was up just 0.7% through Biden's first three years, compared with 16% through Trump's first three years. May 17, 2024 "
"
here is the chart
https://www.reddit.com/r/neoliberal/comments/1cwf25d/trump_and_biden_change_in_net_wealth/
That is a comparison of the dow.
So
not net wealth
SeanT if you read the WSJ article I mention, the chart is NOT about the DOW, but rather a measure of net worth.
If you understood the data you would understand that these rapid changes in net worth are almost entirely due to changes in the value of the stock market.
There is a ton of bad-faith news takes on the economy. You can make arguments to refute them. But I'll just say this:
1. It's true that the highs and lows of the business cycle can affect the fortunes of presidents, but the tools that a president has to affect that business cycle in the short term are extremely limited, and it's extreme folly to be judging presidents and their economic policies based on a statistic or two of current conditions instead of the president's actual economic policies, which should be targeted toward long-term goals. We seem to be heading to a consensus that the goal of a president ought to be goosing results to get better stats than the last guy, otherwise he's gone, even if that means autocracy. It's madness.
2. Whatever "stats" are being argued about are always the ones that favor Republicans. That means "inflation" is a big issue now because it was lower during Trump. Even though inflation has come down by more than half, Biden gets no credit because "inflation" doesn't mean inflation anymore. It means "high prices." We could be talking about real wages or unemployment or a number of other of "stats" but that those would show Biden successes and we can't have that. It's crazy.
3. One big problem that no one is talking about is that inflation has been too low for too long. The decade following the GFC was a time of low inflation, low growth, nonexistent fiscal stimulus, and permanent emergency measures from the Fed with zero-interest rates. We don't want to see that again. If we adjust to a more historically normal economy with inflation about 3% to 3.5%, we'll be far better off. To achieve the Fed's stated goal of 2%, that probably means driving the bus off the cliff.
Ha, great points.
And you just know that next year (when the issue is extending the Trump tax cuts or not) all we're going to be hearing is how the Democrats want to hurt job creators blah blah blah.
And I still say the greatest failure of journalism in our time is the regular poll result that people "trust" the Republicans more on the economy.
I've been saying this for over 2 years. What if we are in a period where 3-3.5% inflation is the new norm compared to the Feds 2% target which cannot be reached without serious increase in unemployment and defaults on debt? How about a .25% cut to stop us from going off the cliff?
This chart very closely tracks the Sp500 and probably doesnt explain much.
Almost noone is inflation adjusting their net worth. There is literally no real world impact for roughly 90% to 95% of Americans.
The inflation adjusted investments and asset values of the top 10% or 1% are probably not driving widespread economic vibes for the rest of America.
But it certainly may be influencing the views of the 1% and how they want the narrative to be shaped.
When there is a predetermined narrative, any chart will do.
Mean net worth mostly reflects the net worth of the top 1 percent. That's where most of the wealth is. The average working person has had negligible net worth throughout the Trump and Biden years. The chart's not about them.
I think a factor in this all is that until Covidflation, we had not had a period of significant inflation in a generation or two. People just do not know how to deal with it. All they see is that that box of cereal that had been $4 forever is now $5.50.
Ah
the Fox News hobby horse
Fox sucks and operates in bad faith.
But
they average like 1.4 millions daily viewers. 200,000 in the 25-54 demo
so less than 0.5% of the population.
It's close, but CPI for the Biden presidency is up less than it was during Reagan's first term. Almost certainly, inflation will be lower in 2024 than in 1984, when Reagan won a landslide. Unemployment is lower today than in '84 too.
(CPI was >4% in 11 of 12 months in '84. It's been <4% every month so far this year.)
One difference is expectations. Reagan followed a decade of high inflation. Biden followed a decade of low inflation.
But media is different too. Axios in recent days was arguing that it's wrong to report inflation coming down because people confuse "inflation" as a substitute for "high prices." Even if those are different, that's just a technicality, and media should report the (wrong) use of the term because that's how (some confused) people understand it. Only when prices come down (which will not happen) can the media report that "inflation" has come down. That sounds like a parody of reality but that's what Axios is seriously arguing. (With media like this, we are doomed.)
In Axios's world, if you were driving 50 mph and now are driving 20 mph, you have not "slowed down." Axios will only report that you have "slowed down" when put the car in reverse and head back to where you came from.
Inflation would be acceleration. Speed would be price.
Ugh, the analogy works whichever level you start from to take the integral. So, yeah, speed:price as inflation:acceleration, but also speed:inflation as price:location.
But, IMHO, JH's analogy works a bit better, because he's using fixed points in space to represent the "fixed" points in price that people apparently expect in Axios's formulation.
In the real world, inflation comes down (disinflation) when the rise in prices slows down. But that's not what Axios is arguing. They're saying they won't report lower inflation until actual prices come down (deflation).
One problem with that is that it fails to report the good news (disinflation). Another problem is that it creates a sense that what would be bad news (deflation) is a desirable outcome.
I think some Americans forget how terrible the economy wa in 2020 even though we were heading into a recession in 2019. And I believe that even though prices have stabilized some folks are struggling to make ends meet in the grocery store and gas pump. Will they blame Biden, perhaps, but I think they all know in the back o their minds that they can't trust trump.
I think in some ways the collective agreement to not think about the pandemic (for some, because it was awful and also a external context problem, for others, because it was a "plandemic" in which Fauci stole our freedumbs!) is really working against us here.
The pandemic is the single most significant global historical event most of us (knock on wood) will ever live through, and if you think about that for just a moment, it's very easy to realize how astonishingly well we came through it. A little inflation for a few quarters is absolutely _nothing_, and the fact that the US under Biden outperformed its peer nations is something we should all be celebrating.
The inevitable collapse of America will likely be a bigger “significant global historical” event, one which I pray to not be alive for, as it will likely mean lots of chaos, bloodshed and economic pain for Americans not seen since at least the Civil War. Most likely it’ll be worse than the Civil War, since (1) much of modernity is predicated on the country being unified (very few states have everything they need to be self sufficient) and (2) the weaponry has gotten more lethal in the last 150 years (entire metro areas can be leveled at the push of a bomb’s button).
"The inevitable collapse of America"
Oh lordy, you're one of *those* people.
There is an interesting idea that I picked up from Peter Sagal - the US Constitution has a lethal flaw in that it was designed for "honorable men" who believed in ideas of honor.
We no longer have honorable men in power, we have greedy power brokers driving the bus.
The problem as I see it is that in the old days wages would (eventually) rise to meet prices. When I was a kid in the '70s I remember hearing about "cost of living" raises - mainly through reporting on new union contracts.
Corporations no longer seem to have an impetus to offer cost of living raises so the standard 3% yearly raise (if you're lucky) remains the norm. This means if prices have risen by 19% since 2021 then corporate employees getting the standard 3% raise have in actuality gotten more than a 3% payout each year of the Biden administration.
For people in this situation the message that inflation has slowed is borderline infuriating. Instead how about the message - "your bosses have recovered, but they haven't passed that recovery along to you."
No, in the 70's wage increases came nowhere near inflation:
https://fred.stlouisfed.org/graph/?g=1ohTF
The decline in real wages continued through the 80's. There was actually a net decrease in real wages in Reagan's first term and even more in the second term. Unemployment peaked at 10.8% in Reagan's first term during a bad recession but came down to 7.2% in November 1984. For workers the economy was bad during the Reagan administration, in some respects worse than in Carter's term, but inflation had definitely eased off. And no, prices did not come down - why should people expect them to come down after the 2021 inflation? The popular understanding of the economy was poor at that time, but probably not as detached from reality as it is now.
All this has virtually nothing to do with anything Presidents have done - they don't have magical powers to control the economy. The Fed does have powers and probably has had more influence than Presidents, but has not prevented inflation, either in the 70's or recently.
"they don't have magical powers to control the economy"
This. People upset that there was some inflation deciding to vote against Biden are akin to nutters upset that it rained on their picnic so they will vote Trump.
Following on to ftantillo's great reminder that there used to be Cost of Living Adjustments for more than just Social Security recipients...
Also, if I recall correctly, the minimum wage wasn't as severely out of whack as it has gotten recently. So the huge increases in (generally state-wide) minimum wages and union-brokered (yay!) pay that have occurred lately didn't happen with Reagan.
But why would that seem "bad"? Because old folks (who vote) haven't kept up with what it costs to live and raise a family. They think $15-20 per hour is totally outrageous for starting salaries of "unskilled" workers. They blame higher prices on those greedy, lazy fast food counter staff -- and of course, the Democrats who made their unearned windfalls possible. And Joe Biden is the Top Dog Democrat.
Just another possible factor.
I think Kevin's list needs to be expanded on and deepened.
I agree with other commenters who point out that we've just lived through a generation of very, very low inflation. Which means that if you're under 35 or 40, say young to mid-career adult, you've never experienced more than very slight inflation by historical standards. And chances are the interest rate hikes we've seen since 2022 are your first experience of rising interest rates *ever* in your lives.
Looking back at 1984, inflation had been a constant topic in the news and in people's lives for at least 15 years (fueled largely by the VN war), acutely so since 1971, and it was at double-digit levels from the oil embargo of 1974 through to, I think, 1980. Allowing for compounding, the Reagan price levels imply something around 4-1/2 to 5% inflation over the 3 years to 1984. After double digits, that was miraculous. Mostly Paul Volcker's doing, and it was paid for in very high unemployment and the free hand Reagan gave employers to shit on employee pay hikes, giving us our current round of income and asset inequality growth. But by 1984 things were starting to pick up again after the Reagan Recession. That was the "morning" of the ad campaign.
And Reagan was very careful to position himself as taking bold action right away (Patco strike especially), and continually reminding people of what he did and what a flint-eyed hardass he was. And granted he didn't have Fox, but he did have a very sympathetic press corps (that didn't care at all for Tip O'Neill and congressional Dems) and Hollywood-level detail-obsessed staging for anything and everything he did in public. Look up Michael Deaver's stagecraft for an idea just how carefully his image was burnished.
This is about people's perceptions here, based on what they've known and experienced in their lives. Granted for most people it's impressionistic, but that just means we need to understand what they draw their impressions from. The contexts going into those three-year periods are so different that we really need to be careful trying to draw comparisons.
There were substantial interest rate hikes in the 90's and 00's, and even a couple percent worth of rate increases in the late 2010's.
At least one recent opinion piece in The Washington Post deals with the fact that many people don't have a realistic view about the current economy:
https://www.washingtonpost.com/opinions/2024/05/28/economy-gloom-voters-inflation/
data point:
vladimir putin (the he-man maga heartthrob) currently has a 7.5% inflation rate in russia
in early 2022 it was 17.5%
IF you believe Russian data.
Seems like the main problem is that people are illiterate/innumerate idiots.
Math is hard but they still go shopping…
Well, that and nobody, particularly reporters -- oh, sorry, "journalists" -- understands economics. It's an arcane bizarro world that very little resembles either the "household budget" or the "corporate spreadsheet." It's why smart elected officials have experts to advise them.
And why "CEOs" are rarely good elected executive officers. Well, part of the reason why. When you rise high enough in the corporate hierarchy, you lose track of how this "democracy" thing is supposed to work, and just expect people to do what you say.
Also, the path to CEO is long and hard enough that people who make it to that position are likely to stay there. The people who become CEO’s but then decide to do something else tend to be people who weren’t good CEO’s. George W. Bush and Donald Trump come to mind.
I don't think Trump was ever a CEO--he was just an owner of a privately held business he inherited. It's not like a board of directors interested in shareholder value ever decided to pick him to run their company.
The media was less partisan in Reagan's day only to the extent that there weren't straight propaganda outlets.
The national media was just as obsessed with both-sides-ism in the Reagan era as they are now, if not more so, and it's no coincidence that Reagan was the first crackpot president of the far right.
During Reagan's first term, the country did not experience an increase in inflation relative to what it had seen in the previous four years. Under Biden it did.
More broadly, by the time Regan took office, the country had been accustomed to a decade of excessive inflation. But that was decidedly not the case in January of 2021. Consequently, there's been an "inflation trauma" factor that Biden's dealing with (and that Reagan didn't have to), because few voters in our current era have particularly vivid memories of the late 70s. The return of inflation came as a new and hideous shock.
But let's not forget: had Reagan faced the electorate in November, 1982, he would have lost his job (and indeed the GOP did suffer serious midterm losses that cycle). He just got his recession over with early, not unlike Nixon during his first term.
Biden had almost nothing to do with the inflationary spike in 2021-22. But life isn't fair. It happened on his watch, so it's his fault. He's just not going to get a lot of huzzahs for fixing his own problem.
Even though he had nothing to do with the problem, right?
One thing I'll fault Biden and administration members for is not accurately explaining is why this occurred. Not only was it snarls in the supply chain due to the pandemic, but when two major food and energy producing nations go to war with each other, dontcha think it would have some effect on the prices of the commodities they produce, hmmm? Especially if one is under attack and the other is heavily sanctioned.
Indeed, Biden has not framed the War in Ukraine as a call for sacrifice, in that in order to beat the Russia, American would have to sacrifice in some part as far as prices go. I think people would understand this. Instead, all they do is look back at 2019 with longing, as if time and history never took place because no one is shaking their lapels ala Jimmy Stewart and saying "Hey! Don't you know there's a war on !?
As I've said before, Trump may be a simpleton about geopolitics but he understands enough that the quicker he gets Ukraine to capitulate, the better it will be for the economy and unlike the many on the Left/Liberal, he'll brag about it.
Looking back at 1984, inflation had been a constant topic in the news and in people's lives for at least 15 years (fueled largely by the VN war), acutely so since 1971, and it was at double-digit levels from the oil embargo of 1974 through to, I think, 1980. Allowing for compounding, the Reagan price levels imply something around 4-1/2 to 5% inflation over the 3 years to 1984. After double digits, that was miraculous. Mostly Paul Volcker's doing, and it was paid for in very high unemployment and the free hand Reagan gave employers to shit on employee pay hikes, giving us our current round of income and asset inequality growth. But by 1984 things were starting to pick up again after the Reagan Recession. That was the "morning" of the ad campaign.
Jimmy Carter basically allowed Volcker to send the economy into recession with severe interest rate hikes to combat an inflation rate that got as high as 18 percent. It split the Democratic Party and cost him his job. Biden has been around long enough to know this and make sure it doesn't happen on his watch and it didn't . And in spite of that inflation hike on an entitled population that thinks cheap food and cheap gas is their birthright, he's basically tied with Trump in most polls. He's in a hell of a lot better spot than Carter was in late May of '80. Why is everyone acting like he's down by 10-plus points?
He's in a hell of a lot better spot than Carter was in late May of '80.
Agreed. Republicans could have nominated the Framingham dog catcher and beaten Jimmy Carter that year. A 21% misery index will tend to do that. It's too bad: history to me suggests he was an excellent president who simply got handed terrible national conditions. Carter would have left office a hugely popular and successful president had he won a second term. And a lot of the awful trends that started in '81-'85 maybe wouldn't have gotten started.
Why is everyone acting like he's down by 10-plus points?
Most...aren't? We're acting like there's a fairly strong chance that Trump will win. Because there is such a chance. Most of the data suggests he'd flip enough swing states to win the Electoral College if the election were held tomorrow. This isn't a one off, but has been the take of many polls now going back several months.
I think there are reasons to believe Joe Biden will prevail. He may even be a (very) narrow favorite if we consider the likely condition of the economy over the next five months. But make no mistake: Trump appears to have a very solid shot at victory, and there's no particular reason to believe polling error is overstating his strength (mind you I hope this is the case; I just don't kid myself there's any evidence of this to speak of at this point. We won't know how accurate the polls are until November). Also, Kevin provides zero backup for his belief that undecideds will heavily break for Biden. Certainly we've see plenty of elections in the past where this has not been the case. Yes, voters all know who Trump is. But they also know who Biden (decades in the Senate; multiple presidential runs; eight years as VP; four years as president) is.
Anyway, (1) a Trump restoration would be horrible; (3) it's a distinct possibility; and yes, (3) this has got a lot of people understandably freaked out.
We're acting like there's a fairly strong chance that Trump will win. Because there is such a chance.
See this is problem. Anyone who is a student of U.S. history should know two things: 1). Crooks and liars get elected and re-elected and 2). Nearly half the U.S. population is illiberal, which explains the division within our population since the nation's founding. So freaking out about Trump is just unhelpful because it assumes an unbelievability about this prospect when history shows it's not true.
The Telegraph posted a story last week about China requisitioning private ships to carry cargo and personnel to Taiwan as part of their military exercise. Some immediately began to speculate that this was a precursor to China going to war with Taiwan.
I think that's all nonsense. But if China does get into a war that is against US strategic interests, inflation's gonna blow up.
Biden will close off China to the American market and most of Europe and the largest Asian markets will follow. Most electronic goods will soar in price, as will cars and most durable goods.
At least food inflation will be nonexistent.
Asians in America will be wearing signs, "NOT CHINESE", and Chinese-Americans will be attacked, while Asian stores and Chinese restaurants will close.
Again, this is very unlikely to happen.
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Why isn’t Biden getting credit for crushing inflation? Because our culture is infected with a virus. Biological viruses are comprised of selfish genes. This virus is comprised of selfish memes.
What's a selfish meme? The idea that "we" are more important and "they" are less important.
How do you defeat a selfish gene? I don't know. Ask a virologist.
How do you defeat a selfish meme? Easy. With a selfless meme. For example, "The intrinsic value of any one human life is precisely equal to the intrinsic value of every other human life." If a significant majority of people voting in November agree, MAGA is toast.