Mr. President, It’s the Cost-of-Living Stupid — Gary Sasse

Mr. President, It’s the Cost-of-Living Stupid — Gary Sasse

Economic metrics suggest that the United States economy has improved under President Biden. In the third quarter of 2023, gross domestic product expanded at an annual rate of 4.9 percent. In January 2021, the beginning of the Biden Administration, the unemployment rate was 6.3 percent. In September 2023 it stood at 3.8 percent. CNN opined that economists are “stumbling over themselves to revise their growth forecasts higher.”

With these results, Bidenomics should be popular with voters; unfortunately, the opposite is true. An October 2023 Investor’s Business Daily/Techanometrics (IBD/TIPP) Poll found that by a 2 to 1 (56% to 24%) margin, Americans do not have faith in the President’s economic policies.

In 1992, James Carville, a key strategist in Bill Clinton’s presidential campaign, coined the phrase, “It is the economy stupid.” In 2023, a more appropriate slogan might be, “It is the high cost of living stupid.”

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President Biden’s dismal job approval on handling the economy may be attributable to the high cost of living. While inflation has been dramatically lowered, prices have not come down.  The IBD/TIPP Poll found that only 16 percent of Americans believed that their income had kept pace with prices, while 60 percent said they did not. While the United States Department of Labor reported that real average hourly earnings slightly outpaced inflation last year, the overall price of goods and services are still 18 percent higher than they were in 2019.

The 2024 presidential election is likely to center on the capacity of families and small businesses to make ends meet, not macro data on job levels and aggregate economic growth. An Economist/YouGov Poll found that “More than half of Americans (56%) say the best indication of how the national economy is doing is the price they pay for goods and services--and not the official unemployment rate, the stock market index or their personal finances.” Bottomline, six out of ten Americans believe that they have been adversely affected “a lot” by inflation, compared to only 5 percent who said they have not.

The Brookings Institution’s William A Galston, writing in the Wall Street Journal, observed a box of cereal now cost $8.99, and many food items cost 30 percent more than they did pre-pandemic. During this period, the average price of a new car increased from $37,000 to over $48,000. The housing affordability crisis was exasperated as mortgage interest rates reached their highest levels in two decades. When President Biden took office, mortgage interest rates were about 3 percent; today, they are over 7 percent.  Galston also reminded us that during this period, new housing costs have appreciated by 36 percent, and existing home prices are up 45 percent. With these price increases, can a typical family say they are economically better off today than they were in 2021?

The consequences of the high cost of living may have a significant impact on the presidential race. A recent New York Times / Siena Poll found that in five of the critical six battleground states, voters trusted Donald Trump more than President Biden to handle the economy. By a margin of 59 to 37 percent, voters said Trump would do a better job with the economy.

Immigration, abortion, and foreign policy, of course, will have an impact on the election. However, confidence in a candidate’s ability to address these matters may erode unless high prices are aggressively confronted.

The presidential candidate whom voters trust to do something about the high cost of living could be advantaged in 2024.  The question is whether a fiscally responsible candidate will emerge that voters trust to improve their economic well-being.

 

Gary Sasse served as the Director of the Rhode Island Departments of Administration and Revenue and Executive Director of RIPEC.