Most Americans had probably never heard of Belvidere until Joe Biden gave the small town its talking 15 minutes of fame Thursday night. The town near Chicago has made a spectacular comeback, said the US President in his State of the Union speech. Not only did the UAW union recently save a car factory there, but a battery factory is now being built there. In Biden’s eyes, Belvidere is everywhere. Thanks to his economic policy, 15 million new jobs have been created in the country, and companies have invested $650 billion, Biden praised himself. Look, it’s working!
It seemed as if the US president lived in a different universe than his people. The majority of Americans are much more pessimistic about the economy than Biden. Only slightly more than one in four rate the economic situation as “good” or “excellent,” according to a current survey Opinion poll the pollster at the Pew Research Center revealed. Almost 60 percent said in another Opinion poll from the television station CBS that the economy is doing poorly under Biden.
In the fourth quarter of 2023, economic power grew by 3.2 percent
This is also surprising because the numbers say something different: the US economy grew by 3.2 percent in the fourth quarter of 2023. A value that should make Federal Chancellor Olaf Scholz and many of his European colleagues green with envy. The important stock index S&P 500 reached an all-time high at the beginning of March. Unemployment is also at an almost historic low. In January alone, more than 350,000 new jobs were created in the country.
Normally, US presidents can capitalize on such a boom. Because when the economy is doing well, voters see that as a personal success for the man in the White House – which is often a gross overestimation. Even the supposedly most powerful person in the world has only limited influence on the economy and consumption; after all, the United States is a market economy and not a planned economy.
Conversely, incumbent presidents are punished by the people in times of crisis. In the past 70 years, only four incumbents have failed to seek re-election. Each time, the American economy was in recession. This was last the case in 2020. Donald Trump lost to Biden shortly after the corona pandemic tore up supply chains and shut down businesses everywhere. George Bush, the elder, also lost to his challenger Bill Clinton in 1992 because of the ten million unemployed people in the country. His advisor James Carville came up with a slogan during the election campaign that is actually no longer allowed to be quoted because it is so hackneyed: “It’s the economy, stupid.” It depends on the economy.
At least that’s how it was so far. In the eyes of voters, the economy outweighed foreign policy and controversial issues such as abortion and gun rights. But many things are different in this election year. Recent polls suggest that voters see migration as the most pressing issue this time.
The fact that Biden cannot benefit from the actually good economic situation also has to do with inflation. At 3.1 percent, the inflation rate was recently only one percentage point above the value that the US Federal Reserve is aiming for as a target and that economists consider sensible for a stable economy. But sometimes economic analysis and personal feelings are two different things.
Low- and middle-income Americans in particular continue to feel oppressed by price increases. Because these persist particularly in those areas of life that consume a large part of household income: in the housing market or in healthcare, for example. In addition, many consumers have long-term memories. If a cheeseburger costs 13 dollars today, but only 10 dollars two years ago, consumers perceive this as disproportionate, regardless of whether inflation rates are stable or even falling.
Even rising wages cannot change this. “People believe they deserve it,” says US central banker Tom Barkin, who helps decide on the key interest rate on the Federal Reserve’s governing body. “In contrast, they see inflation as something that is coming to them.” One is their right, the other is a stroke of fate, as many see it.
“Shrinkflation” is causing problems for many people
Unsurprisingly, Biden looked for someone to blame in his speech. In addition to corporations that pay hardly any taxes, he complained about the food industry: “Chip manufacturers believe that no one will notice if they increase prices and at the same time make their packaging smaller.” Shrinkflation is called this phenomenon. Biden has now announced, among other things, that he will take action against high prices for medicines and excessive credit card fees.
But it is also true that Biden’s economic policies are not well received by all voters. Its multitrillion-dollar stimulus programs have burned a hole in the budget since the pandemic, but contributed just 0.2 percentage points to economic growth last quarter, according to one analysis the Brookings Institution think tank found out. Six in ten Americans, regardless of party preference, think the president urgently needs to reduce the budget deficit. And: Most people trust his challenger Trump to solve the country’s economic problems.