We’re not going to argue whether the state of the U.S. economy is “good.” We could make the argument that the economy is at least OK, sure.
Let’s face it: economic well-being is in the eye of the voters.
But the one thing we do know is that public sentiment on the economy has been shifting. And after years of President Joe Biden taking a beating over this in the polls — especially on inflation — Democrats are ready to go on the offensive.
“The challenge of being president is, you own the bad stuff whether you caused them or not,” Sen. Mark Warner (D-Va.) told us. “You gotta own the good stuff as well.”
Biden and congressional Democrats have little shot at success in November if voters don’t believe the economy is working for them.
Here’s a look at their argument for why they should after a series of positive economic reports.
The pitch: Higher prices haven’t gone away, true. But the picture has improved consistently since mid-2022. Inflation is down, housing prices are down and wages and GDP are up.
Even energy costs are on a significant decline. The Commerce Department said the falling price of gasoline was “the leading contributor” to last month’s inflation win. That’s happened partly with the help of a booming U.S. oil market.
Then there’s the ultra-low unemployment rate, one of the Biden economy’s consistently brightest spots. The jobless rate has sat under 4% for 23 months.
Most importantly for the White House, the latest consumer sentiment data suggests voters are slowly but surely warming up to Democrats’ message.
“We just lived through a natural experiment testing whether austerity or investment strengthens an economy through troubled times,” Sen. Elizabeth Warren (D-Mass.) told us. “Bigger investment won by a wide margin. Credit goes to Team Biden for figuring that out.”
The GOP counter: Republicans aren’t ready to give an inch. They argue voters are still bruised and battered by inflation and Democrats can waive around all the wonky data they want. Here’s what Sen. Cynthia Lummis (R-Wyo.) told us:
But if you listen closely, Republicans are leaning in harder on other issues.
“We know right now it’s about the border, number one, and the cost of living, number two,” Lummis said.
Immigration will surely be front and center of GOP messaging. But let’s not forget that Republicans spent the last two years talking about the economy, especially soaring inflation and how Biden and Democrats allegedly caused it with excessive government spending. That economy is improving.
Here’s how Sen. Kevin Cramer (R-N.D.) took a crack at addressing the conundrum:
“I don’t dispute that people feel better about 4% inflation than they do about 9% or 10% inflation, for sure,” Cramer said. (Annual inflation is currently closer to 3%.) “But they’re still not able to get a mortgage, or they’re paying way too much interest on their car payments.”
We also asked Cramer, an optimist by nature, whether he thought rebounding consumer sentiment was a trend. Cramer’s response illustrates the tightrope Republicans may have to walk as the campaign heats up.
Cramer might be right. But with 10 months until November, Democrats have plenty of time to make their case.
Dem worries: Many of Biden’s congressional allies cheered by the positive economic news are also urging the administration to back off policies they worry could damage the recovery.
Some moderate Democrats have embraced arguments from the banking sector when it comes to new rules being considered for capital standards — known as Basel III Endgame — or the cushion regulators want lenders to maintain as a buffer against potential losses. Banks are on the warpath against the proposal.
Some news here: Several Democrats led by their campaign chief Gary Peters (D-Mich.) wrote to the Biden administration’s financial regulators with concerns about “the proposed Basel III Endgame’s impact on small businesses.” The focus here is mostly on access to credit, particularly among communities of color.
Read the full letter here, which is also signed by Sens. John Hickenlooper (D-Colo.), Tom Carper (D-Del.), Debbie Stabenow (D-Mich.) and Jacky Rosen (D-Nev.).
There’s also the massive government debt. Higher interest rates meant higher payments to service that debt. Interest payments are expected to exceed $1 trillion this year. And the annual budget deficit is large and growing. There’s no chance to address these issues without some bipartisan consensus. That’s not happening anytime soon.
So it’s not all roses for Democrats. But if the U.S. economy maintains its current trajectory, it’s going to be tougher to run against it as a Republican.
— Brendan Pedersen and Laura Weiss
