Less than four years after lame-duck President Donald Trump held a press conference touting the Dow Jones Industrial Average reaching $30,000, President Joe Biden on Thursday pushed the Dow Jones Industrial Average to 4. It heralded the arrival of a million dollars.
As of this writing, the index has fallen below that milestone, but so far it’s still a notable rise, since what goes up can always come down. Either way, the implication is that Biden’s economic policies are working despite stubborn inflation and high interest rates, and despite Republican attacks that his regulatory and tax policies will backfire. It means that you are doing it.
However, the president’s claims have not resonated with voters. Biden’s approval rating remains in the low 30% range. The last two incumbents with approval ratings in the 30s at this point in their presidencies were George H.W. Bush and Jimmy Carter, both of whom won second terms. This is also bad news for Democrats on Capitol Hill, with polls showing unexpected weakness in states like Nevada.
A landslide victory for Republicans is far from certain, given Trump’s own unpopularity, the Republican Party’s mainstream views on abortion, and voters’ bias toward divided government in recent decades.
Since President Richard M. Nixon won in 1968, voters have chosen unity government, meaning one-party control of the White House and both houses of Congress, less than one-third of the time. Most pollsters and political forecasters think they’re all big shots at the moment: the House, Senate, Oval Office, etc., but the top of the polls is likely to have some buoyancy effect on the polls. .
Market profits are spread unequally
Making noise about the Dow around 40,000 probably won’t work for Biden.
It’s true that more Americans own stocks than ever before, reaching 58% in 2022, according to the Federal Reserve. But among black and Hispanic households, where Mr. Biden needs to shore up his support, both the number of households owning stocks and the amount they hold are well below the national average.
And at the end of last year, 87% of stocks and mutual funds belonged to the top 10% of U.S. households in terms of net worth, according to Federal Reserve data. Meanwhile, the bottom 50 percent held just 1 percent of those assets. After spending more than three years bashing greedy corporations, taking credit for huge corporate profits that go mostly to the wealthy may not be the best image for Rust Belt voters for Biden. unknown.
Stocks are not the only measure of household wealth. Fixed income products such as corporate bonds and U.S. Treasuries, which have seen little increase in value for decades, have been hurt as inflation squeezes profits.
The value of holdings in the Bloomberg Aggregate Bond Index, which tracks a basket of investment-grade U.S. bonds, has fallen nearly 5% since Biden took office. A typical “balanced” investment portfolio of 60% stocks and 40% bonds still appreciated significantly during this period, but more conservative investments, including retirees and near-retirees, Things aren’t going so well at home.
Effect of interest rates
Then there’s real estate. While property owners have settled for huge price increases, many are still “locked in” to their homes with low mortgage rates compared to the current 7%+ 30-year fixed rate that was fixed a few years ago. According to the Philadelphia Fed, mortgage originations at major banks fell nearly 75% from the beginning of 2021 to the end of last year.
Home equity lines of credit have ballooned as consumers continued to spend despite large price increases, but these claims are now being paid at higher interest rates, making it difficult for households to save or spend on other things. I’m wasting the money I wanted. Home construction and renovations, which account for about 4% of gross domestic product, are declining as inflation and interest rates rise, according to the National Association of Home Builders.
For the one-third of U.S. households that don’t own a home, rent growth has generally outpaced wage growth during President Biden’s term. The same goes for groceries. Gasoline prices have increased by more than 50%, much of it since Russia invaded Ukraine in February 2022.
The situation gets better when taxes and government benefits are taken into account. Not counting stock market gains, inflation-adjusted disposable income per capita for Americans has increased by about 5% since Biden took office. But a study by the Congressional Budget Office found that while all income groups have been better off since 2019, the richest have benefited the most and the middle class the least. .
Despite these headwinds, the economy overall is holding up fairly well, better than Biden’s approval ratings suggest.
The White House Council of Economic Advisers noted that real economic growth over the past year has remained steady, averaging 3% over the past several quarters. Even when the numbers were narrowed down to just consumer spending and private business investment, and more volatile factors were subtracted, growth was also solid.
The latest Consumer Price Index report showed that the annual rise in “core” prices, which exclude volatile food and energy costs, was the smallest since April 2021. CME Group’s FedWatch tool could give Biden a boost before voters even go to the polls.
What about the MPs on the sidelines?
For now, Congress is just a spectator. Despite its superficial appearance of dysfunction, this is not to say that the legislation was not productive. Key bipartisan agreements on annual spending, funding for the war in Ukraine and reauthorization of warrantless surveillance of foreign nationals deemed a potential national security threat have been cut, and new concerns over privacy have been cut. There are also some mentions.
Biden just signed an aviation bill that includes modest new investments in airport infrastructure and adds five new flights in and out of Ronald Reagan Washington National Airport. It requires airlines to offer refunds for long delays and cancellations and prohibits extra fees for families who want to sit together on crowded planes, part of Biden’s fight against “junk fees.”
But a new multi-year farm bill is likely to go uphill this year, and federal agencies will almost certainly move toward another continuing resolution to keep spending in check until after the election.
Things won’t get any easier next year either. A major fight over the debt ceiling and expiring 2017 tax cuts is on the horizon. But this Congress showed that divided government can still get things done.
And despite Biden’s misfortune, incumbents in vulnerable battleground states are outperforming the president, with split-ticket voters tired of Biden but looking for a check on Trump. , showing that a divided government may still have a chance.
Peter Cohn is CQ Roll Call’s fiscal policy editor.
