An Economic Boom and a Popularity Bust for Biden | Dispatches from the Potomac

Dispatches from the Potomac#48 | An Economic Boom and a Popularity Bust for Biden:
The (Un?)Importance of the Economy in the Upcoming U.S. Presidential ElectionThe (Un?)Importance of the Economy in the Upcoming U.S. Presidential Election

Yusuke Inoue, General Manager, since January 2024, of Marubeni America Corporation's Washington DC Office, will be the author for this column.
* This is a translation of an article originally written in February 2024 for publication in the April 2024 edition of the Marubeni Group Magazine, M-SPIRIT.

General Manager, Washington DC Office, Marubeni America Corporation Yusuke Inoue

Already in Election Mode: The Mood in DC

It has only been a month since I moved to Washington, DC, and the district is already deep into “election mode.” Though both the Democratic and Republican primaries already seem ready to crown their winning contender, the actual November 5 election is still over six months away. While a part of me feels it is still too early for such intense election hubbub, the race is all anyone seems to be talking about. The dissection of the day-to-day statements of President Biden and former President Trump, the results of the latest polls, and detailed developments in international affairs and domestic policy, as well as how they will affect the presidential race, never stops. Not even Taylor Swift is exempt: Here in Washington, she gets discussed more for her potential effects on the campaign than her music career.

Another of my abiding impressions is how strong the economy is. As a new arrival from Japan, where prices remain relatively low, I still find myself balking at paying $15 for a take-out sandwich, while those around me swipe their cards without batting an eye. Upscale restaurants always seem quite full during lunchtime, even on weekdays. Various indicators also point to a booming economy: real GDP growth in 2023 was +2.5% year on year, well above the potential growth rate (+1.8% or so); the labor market continues to see employment growth higher than pre-COVID conditions; the inflation rate is steadily improving; and consumption, boosted by real wage growth, is increasing. Stock prices are at all-time highs and, overall, capitalism appears to be working well.

What is mystifying in the midst of all this is President Biden’s dismal approval rating. The Biden administration, inaugurated at the height of the pandemic, has already accomplished quite a bit. The passage of the American Rescue Plan ensured excellent pandemic recovery, and the Inflation Reduction Act (IRA) allocated huge budgets for climate change measures and the energy security sector. In terms of the economics game, the U.S. appears to have emerged as the sole winner, attracting investment from around the world as China’s economy stumbles. Despite this, President Biden’s approval rating is still languishing below 40%, clearly stagnant compared to the ratings of previous presidents at the same point in their tenure. How should we interpret this seemingly contradictory situation?

The Economy: Too Good to Be Worth Fighting Over?

The answer most commonly heard to this question is the view that the economy is not, in fact, as strong as the indicators suggest. Although the rate of price increases has subsided, the pain of inflation remains; after all, price levels are still higher than before the pandemic. Although the U.S. economy is doing well from a macro perspective, wage growth and employment opportunities may not be sufficiently widespread when viewed on a more micro level by occupation, region, and other factors. In other words, there is a reality ordinary Americans are experiencing that cannot be measured by averages. Another view is that it takes time before improvements in economic indicators make an impact on voters’ actual lives.

Yet another perspective is that the country’s strong economic situation does not translate well to an incumbent president’s approval rating because there are other important issues at stake. In particular, views on issues that cannot be explained logically and are emotionally charged may have a greater impact on approval ratings. Immigration is a prime example. The problematic surge in immigration from the southern border is a multifaceted issue that calls into question the Biden administration’s ability to govern in multiple ways, including concerns about deteriorating security, the economic impact of the entry of low-wage workers, and whether the government’s treatment of immigrants is humane. As the priorities of the various age and racial groups, industries, and regions that make up U.S. society change and their values diversify, there is also a growing interest in what, in terms of principles and ideals, the United States should and does stand for.

However, there is also an argument to be made that the economy has not become an election issue precisely because it is so strong. Because the majority of Americans are economically satisfied, this reasoning goes, they can afford to focus on their personal values and the mid- to long-term direction of the nation. The lack of any major economic dead spots in 2016 created the soil in which the Trump administration could take root. To put it another way, the fact that partisan conflict is intensifying is a reflection of the fact that there is little concern about the economy.

Presidential elections in the United States, which has a two-party system, are ultimately a popularity contest between two opposing options. Candidates must appeal to voters in such a way as to garner their active support. For President Biden, simply highlighting his four years of accomplishments is not enough to drive voters to the polls. I, for one, will be keeping an eye on what themes the Biden administration will use to fire up voters in the months leading up to Election Day.