Among the many things President Joe Biden needs to accomplish during his State of the Union address Thursday is to turn the conversation about the economy around.
The facts are on his side, but many voters don’t feel them. To change that, he’s got to tell voters every day until Election Day exactly what he’s doing to tackle one of their biggest concerns: high prices.
People often credit themselves for getting a raise, but blame the government, and especially the president, when life costs more.
Thirty-one percent of voters say the economy has improved, a 10-point increase in just a few months. The president, however, is not reaping the rewards.
Despite good, empirical data about the economy, people experience higher prices every day, everywhere they go, from restaurants to grocery stores. It’s what sticks in people’s minds. And while wages have gone up, from a behavioral economic standpoint, people often credit themselves for getting a raise, but blame the government, and especially the president, when life costs more.
That’s the predicament Biden finds himself in going into the election. Which makes the message around the economy crucially important.
Let’s start with the truth, even if it’s not universally acknowledged: A year ago, there was near total agreement a recession was coming.
Instead, the economy grew 2.5% in 2023.
Unemployment was expected to rise, especially as the Federal Reserve sharply hiked interest rates to slow inflation (and the economy). Instead, unemployment has hovered below 4% for nearly two years, something not seen since the 1960s. Today, it’s 3.7%. At the same time, employers are hiring at a furious pace. Last year, nearly 3 million jobs were created — maybe that has something to do with the 5.5 million new businesses started last year.
Consumers are feeling better about the economy. A recent survey found they’re feeling more confident about both the economy and that inflation will keep slowing. CEOs are more optimistic, too. Business Roundtable’s latest poll found their outlook for the economy jumped double digits and is now above the historical average. They plan to invest more in facilities and hire more.
Let’s not forget the stock market, which is setting new records on a regular basis. The average 401(k) is up 14% from a year ago and is now $118,600. The stock market is not the economy, but for many Americans, it serves as a daily temperature check for how things are going. While not everyone owns stocks, 58% of households do — the largest share on record.
Then there are all the bipartisan bills to promote economic growth today and for years to come: the American Rescue Plan Act, the CHIPS Act, the Inflation Reduction Act.
But let’s be honest, all this is not sinking in with voters. Poll after poll finds them generally unhappy about how Biden is handling the economy and uncertain about where it’s headed, especially because of inflation.
The good news is that prices are rising more slowly, but that’s coming off years of supercharged inflation, especially for groceries, which are up 25% since January 2020. Shoppers know this every time they walk into a supermarket — they see it and it’s maddening. People feel there’s nothing they can do, and it’s not like they can skip milk, eggs and bread. Today, Americans spend over 11% of their income on food, the highest amount in 30 years.
Biden can’t fix high food prices, but he can point to what his administration is already doing to help Americans save money. For just a few examples:
- Increasing the amount of food assistance for low-income families.
- Moving to block the merger of the No. 1 and No. 2 supermarkets, which could limit competition and choice.
- Capping insulin at $35 per month, and next year capping Medicare prescription costs at $2,000 a year.
- Canceling $138 billion in student debt.
In reality, until recently, consumers have kept paying even as prices rose. But once consumers decide that meal or that flight simply costs too much and businesses see demand suffer, there might be a change. The problem is that everyday items cost more. For economically vulnerable families, that can be crushing. For wealthier Americans, it’s annoying and cause for discontent.
There’s a lot that is going right in the economy. It should be universally agreed on: It’s not a bad economy. Voters, however, are not economists and facts alone won’t convince them. Americans need to feel their financial lives are improving, and it’s on the president and his administration to show how they’re making that happen. And when Biden steps up to the podium Thursday evening, he has a chance to do just that.