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Matthew A. Winkler
As Americans cast their votes near the end of Democrat Joe Biden’s second year in the White House, his 42% approval rating and the outcome of such midterm elections historically favoring the party not currently in charge gives the edge to Republicans. But the history of more than a dozen measures of relative prosperity shows Biden outperformed the last six of his seven predecessors and the 46th president has no peers reducing the nation’s budget deficit.
The reality is that Biden has a credible economic record in the looming showdown with Republicans threatening to cut Social Security and Medicare spending while opposing any increase in the nation’s borrowing limit next year. Growth in gross domestic product, jobs created, expanding home equity levels and the strengthening dollar combined to make the Biden economy over his first two years superior to every midterm presidency since Jimmy Carter.
As if that’s not enough, the almost 10 percentage-point decline in the federal budget deficit as a percentage of GDP — to 5.4% from 15.6% — is unprecedented. Presidents Bill Clinton and Carter reduced the deficit 2.4 percentage points and 1.1 percentage points, respectively, in their first two years while it expanded 1.1 percentage points under Donald Trump, 1.3 percentage points under George H.W. Bush, 1.7 percentage points under Ronald Reagan, 3.7 percentage points under Barack Obama and 4.5 percentage points under George W. Bush, according to data compiled by Bloomberg.
To be sure, the sudden scourge of inflation that was sparked by the Covid-19 pandemic eroded wage gains and prompted the Federal Reserve to tighten credit the most for any eight-month period. Stocks and bonds fell into bear markets, putting a big dent into savings and retirement accounts, with the central bank signaling no end to rising interest rates. But even as the bond market sustained losses for the first time in a first-term presidency going back to 1988 when such data was first compiled, benchmark Treasury securities proved a better investment than debt from the rest of the world, where inflation accelerated at a faster rate.
Aside from the $1.4 trillion reduction in the deficit, which is the largest drop in US history, the Biden economy broke another record when non-farm payrolls increased 7.6% to 153 million, the most since such data became available in 1939. At the same time, the US enjoys an unemployment rate of just 3.7%, hovering near a 50-year low. Jobs under Carter in the second half of the 1970s rose a greater percentage, 10.2%, but total payrolls were much smaller back then at 88 million. They climbed 6.1% during Clinton’s first two years, 3% under Trump, 2.1% under the first Bush and declined 3% under Obama and 1.7% under the second Bush, according to data compiled by Bloomberg.
Manufacturing employment under Biden climbed 6% to 12.9 million, the most since 2008 and a percentage gain exceeded only by Carter’s 9.1%. Factory workers declined 3.5% and 13.2% during the Bush midterm presidencies, 10.5% under Reagan and 9.8% under Obama. They increased 3.5% for Trump and 2.7% for Clinton, according to data compiled by Bloomberg.
Nominal GDP reached a record $26 trillion in September, rising 18.2% under Biden and beating every midterm presidency since Carter’s 28.1%, when GDP was just 9.6% of today’s total. Homeowners’ equity in real estate advanced 31.5% to $29 trillion, a percentage gain unsurpassed since the 40% increase to $1.5 trillion under Carter. Dollar strength underlined the Biden economy’s rebound from the Covid-19 pandemic, appreciating 23.3% against major world currencies — the most for any midterm presidency since Reagan was in the White House. The dollar depreciated for every other president in their first two years, according to data compiled by Bloomberg.
Biden’s biggest weakness, of course, is inflation. The Consumer Price Index rose 9.1% in June from a year earlier. This inflation figure has since eased to 8.2% and estimates by 70 economists surveyed by Bloomberg say it will continue to trend lower from its midterm average of 6%, well below the rate of inflation in the UK, Europe and Latin America. Gasoline prices in the US are down 18% from their June high, though still up 65% from when Biden took office, according to data compiled by Bloomberg.
The good news is that Americans as a whole are better equipped than ever to weather the current spike in prices. The generous social programs instituted by the US government to support the economy through the Covid-19 pandemic allowed consumers to build up an abnormally high cash cushion. Checkable deposits for households and nonprofit organizations rose to $4.89 trillion as of the end of June from $1.16 trillion at the end of 2019, according to the Federal Reserve.
For all of the economy’s presumed flaws since he took office 22 months ago, Biden is proving to be among its ablest stewards. No major developed nation has recovered faster from the Covid-19 pandemic. With unemployment at all-time lows in 11 states and less than 3% in 17 others, Biden policies helped create almost 700,000 manufacturing jobs as companies invested in domestic industries amid the century’s biggest commitment to rebuilding roads, airports, bridges and ports. Any presidency achieving this much while overseeing the record decline in the federal deficit during the quickest rebound from recession speaks for itself.
—Bloomberg