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American Pessimism in a Remarkably Strong Economy [1]

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Date: 2024-02-07  

America, like much of the West, is filled with a sense of dread, of being in a state of permanent decline. Those on the right worry about the size of the government and of the national debt, and those on the left worry about inequality and corporate power. Each side worries about the plight of workers and the squeezing of the middle class. Trump won on the promise of making America great again. President Joe Biden passed a $2 trillion infrastructure bill to reshape the economy. Pessimism has gripped all sides. That pessimism has grown since the Covid-19 pandemic, and that has hurt President Joe Biden’s poll numbers. Donald Trump has been the beneficiary of this pessimism, because, in many ways, he is the “candidate of nostalgia”, as Democratic pollster, Kristen Soltis Anderson , described him. His supporters have forgotten the chaos of his administration, forgiven him for his record with Covid-19, and judged his economic record with rose-tinted glasses. However, economic trends have been improving and the United States is in fantastic health, and doing much better than any of its peers. The OECD Chief Economist described the US economy as showing “remarkable strength” . Could this improvement in the economic fundamentals result in President Biden’s poll numbers improving and him winning the election?

America is on the Right Track

All around us, there are signs of improvement. The S&P 500 is up 5% since the start of the year, reaching record highs. According to the Labor Department, the US economy added 353,000 jobs in January, far in excess of expectations, with Biden hailing the economy as the “strongest in the world”. Last year, the economy grew by 3.3%, making it the world's fastest growing advanced economy. Inflation fell to 2.6% in 2023, close to the Federal Reserve’s 2% inflation target. The fall in inflation has led many investors to believe that by the end of the year, the Fed will lower the benchmark interest rate from the 5.25%-5.5% range it’s at right now, to under 4%, which would reduce borrowing costs, and accelerate growth.

The underappreciated strength of the economy is beginning to have an impact on how people view it. According to Pew Research , while perceptions of the economy have not recovered from the pre-Covid-19 era, they have improved in the last year. In their latest polling, they found that 31% of Americans believe that the economy is poor, compared to 28% who say it’s excellent, and 41% who say it is just “fair”. Of course, problems remain, with four-fifths of Americans believing that the economy will be worse for their children. American pessimism about their future is at its lowest level since 2009 . However, many of the president’s investments have been made to change that reality, and voters do not vote on the basis of a president’s ability to solve every problem, but to make a tangible difference within his term and lay the groundwork for a better tomorrow. Judged by any objective measure, Biden’s tenure has been a success.

Optimism Will Rise

If the economy continues to show strength, that will eventually translate into real savings for Americans, dimming the sense that many struggling families have that they are in such a bad place that they may as well risk everything in a Trump presidency. The pandemic has had a strange effect on the country, making the time before it seem almost dreamlike, and that has exacerbated the sense of doom within the country. That feeling is unlikely to go away by November, but Americans may feel better about the economy in November, dimming Trump’s appeal, and helping Biden get over the line.

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