Twelve months ago, it seemed like the economy might wind up being President Joe Biden’s biggest weakness. While hiring was supercharged and unemployment was near an all-time low, inflation was busy making a major dent in Americans’ wallets. Gas prices in particular were causing pain at the pump, and Republicans expected to ride the discomfort to solid political gains.
What a difference a year makes. Not only did Republicans largely underperform in last fall’s midterms, but the latest inflation figures show that efforts to hit the brakes are also working. Consumer price growth — the change in how much Americans pay for things including food and energy from year to year — has fallen every month since June 2022. It’s now sitting at about 3%, just about a point higher than the Federal Reserve’s goal. A major factor in that drop has been collapsing gas prices, even as the summer vacation season continues.
It’s no surprise, then, that Biden has started touting the benefits of “Bidenomics” ahead of next year’s election. And dropping inflation has deprived Republicans of one of the most surefire ways to attack a Democratic president. Republicans who were once morbidly gleeful at the idea that the economy might take a nosedive are now silent, at least when they aren’t busy taking credit for investments that Democrats passed over their objections.
It’s kind of hard to blame them for their reticence, when neither Republicans in Congress nor those statehouses can take any real credit for inflation falling. The data shows that inflation began trending downward long before the GOP narrowly recaptured the House. And Republican policies at the state level haven’t exactly been outperforming the national average. In fact, the highest inflation in the country is in Florida, home to Gov. Ron DeSantis.
House Republicans also can’t link falling inflation to their promises to curb federal spending. For one, Federal Reserve Chair Jerome Powell — a Donald Trump appointee, no less — has said repeatedly that, after an initial spending surge to combat the Covid-19 pandemic, government outlays are no longer a major driver of inflation. Powell instead “says rapid price growth is primarily being driven by factors like snarled supply chains, an oil shock following Russia’s invasion of Ukraine and a shift among American consumers from spending money on services like travel and dining out to goods like furniture,” The New York Times reported in March.
Until last month, the Fed had been steadily raising interest rates to try to curb inflation, pausing in June after 10 straight hikes. Its efforts appear to have tamped down price rises without the expected surge in unemployment accompanying it. Even the modest hiring slowdown in June still saw solid growth in the labor market.
Republicans who were once morbidly gleeful at the idea that the economy might take a nosedive are now silent
More important, congressional Republicans haven’t actually passed anything that affects government spending yet. It’s true the debt ceiling deal sets guidelines for lower spending over the next two years. But Republicans are still fighting among themselves over exactly what to cut — and whether to cut even lower than the terms of the deal. In fact, that debate may pose the biggest threat to the economy if it leads to a federal government shutdown. Even a short shutdown, like the partial shutdown that ended in January 2019, can cause “dampened economic activity,” as the Congressional Budget Office puts it.
That doesn’t mean that Republicans, especially 2024 presidential candidates, will stop blaming higher prices on Biden and the Democrats on the campaign trail. “I will stop Joe Biden’s inflation nightmare, save the U.S. economy,” Trump promised in a speech last month. Likewise, DeSantis told a crowd in Iowa last month that “with these economic problems with inflation, you may want to tap into more domestic energy.”
The data tells another story: According to the U.S. Energy Information Administration, the U.S. is actually producing more oil domestically today than it did at this point in 2019. And when you look around the world, the U.S. economy is doing way better than most of its competitors. Among the Group of Seven richest nations, the U.S. ranks best in post-pandemic growth. And as California Gov. Gavin Newsom skillfully pointed out to Fox News host Sean Hannity last month, the U.S. also has a lower inflation rate than any other G7 member — it’s not like Biden’s policies are driving up inflation in Germany.
That having been said, the Republican onslaught of messaging on inflation is pretty baked in after the last two years. A Pew Research Group poll last month found a major gap between Democrats and Republicans over whether inflation is a “very big problem”: 52% of Democrats say it is, versus 77% of Republicans. And on the economy as a whole, Biden is deep underwater, according to the latest AP-NORC poll. Only 30% of Americans would describe the economy as “good,” including 47% of Democrats and 13% of Republicans.
Those are some pretty dire headwinds for Biden to work against as he tries to sell the country on Bidenomics. But here’s one last bit of data that might make things a bit easier: For the first time in more than two years, wages nationally grew faster than inflation. If that keeps up, Democrats may be able to go on offense in 2024, campaigning on protecting the Biden economy from the GOP.