The strange lack of electoral reward for the success of Bidenomics

Wasn’t it supposed to be about the economy? Putting a question mark on James Carville’s insight from the 1992 US presidential contest is the best way to capture the strangeness of this year’s US presidential election. Today’s article confronts how the economy is behaving differently — in a good way — from what it has done for many decades, yet political polling doesn’t seem to reflect that at all.

But first, a word of thanks to Tej Parikh for brilliantly keeping Free Lunch going last week. If you missed it, go back now to read his piece on signs of weakness in the US economy, as it provides useful background for the puzzle we’re about to discuss.

Almost as old as the Carville quote is the head-scratching about why Americans do not vote in line with their economic interests. The anti-Carville thesis came of age with What’s the Matter with Kansas, Thomas Frank’s 2004 book about how the Midwestern state shifted to cultural rather than economic voting patterns.

The debate about “culture versus economics” has been raging ever since, of course, and reached fever pitch after the election of Donald Trump in 2016. It has also gone international, with the need to explain the rise of nativist populism in virtually all western countries.

As regular Free Lunchers will know, I have long been on the economics side of this. Without denying that the political polarisation we see in varying degrees everywhere takes a cultural expression, we need to recognise the economic disempowerment that generally triggers those “values conflicts”. My favourite example is how even in Sweden, the rise of nativist populism can be attributed to groups being left behind economically.

This sort of analysis is leading people like myself to support policies of the sort the Biden administration has adopted. They are the best chance to give a better deal to those left behind by the structural economic changes of the past 40 years, and that should reduce the allure of illiberal, anti-democratic nativist movements.

But the current political situation in the US forces me to ask whether I was wrong. More precisely: why, given that President Joe Biden’s policies are reversing a lot of the past economic damage, is he not getting credit for this in voter support? Does it mean economics was not at the root of things after all?

Before attempting an answer, let’s just survey the facts. First, consider the evidence that the policies are, in fact, undoing the past damage. Economist Arin Dube’s Substack covers some of the striking developments in real wages since the pandemic. In his words:

Using data from the household-based Current Population Survey through December 2023, the average wage for the middle quintile of workers (based on hourly earnings) stands higher than: 1) prior to December of 2019 (right before the pandemic), 2) December of 2020 (right before the start of the Biden presidency), and 3) what would be expected based on trends from the five years prior to the pandemic (2015-2019).

You can see this visually on his graph (it greys out the most disruptive period when the composition of jobs changed when a lot of lower-paid people were fired and then hired again) — click here for a larger version.

And the news is even better when looking at the low paid. While middle-of-the-road workers enjoy higher real wages than four years ago and higher than they could have been expected to enjoy without the pandemic, they did suffer real wage stagnation during the worst inflationary period. But if you include those below the middle — Dube looks at the lowest 60 per cent and 80 per cent — their real wages didn’t fall even then, because wage growth has been so much stronger at the bottom end of the labour market. (In another post, Dube also shows how strong labour markets have narrowed racial wage and job disparities to their lowest levels on record).

In fact, this lifting of wages at the bottom has undone nearly 40 per cent of the previous four-decade increase in wage inequality.

That, then, is the main achievement of the large fiscal spending on workers that has been so strongly criticised by those who think Biden should have been less generous and worried more about inflation.

Then there are the industrial effects of Biden’s manufacturing subsidy programmes, which have produced a jump in manufacturing construction and infrastructure spending. There are more US factory jobs than at any point since the end of 2008.

So the economic achievements are clear (although as Tej pointed out last week, they may be starting to wane). But the second important fact, then, is that political polling hardly reflects these economic outcomes at all.

Paul Krugman has been looking at this puzzle for some time, offering two part-explanations. One points to how people tend to say things are going well for themselves even as they say they are going badly for the country. That’s what the FT’s very own poll suggests, which finds a much larger share of respondents assessing their personal economic situation positively than the economic conditions of the country as a whole (46 per cent compared with 27 per cent; both figures have risen in the past three months). So perhaps it’s the media’s fault: people are wrongly cued to think that the general situation is worse than what their personal experience tells them — a misanthropic version of the Lake Wobegon effect, as it were.

Krugman’s other explanation relies on the observation that survey responses to economic questions have become strikingly partisan: people tend to say economic conditions are good (bad) when their party is (not) in power (see John Burn-Murdoch’s chart below). Krugman highlights how this bias is stronger among Republican than Democratic voters, which would increase the negative bias at the moment. Perhaps this can account for the most striking finding of the same FT poll: a higher share of voters — 42 to 31 per cent — say they trust Trump rather than Biden most to handle the economy.

These sets of facts, of course, just elaborate the puzzle. Why doesn’t the undeniable economic progress show up in political polling? Is it that Carville is passé, and political support is not (or no longer) about the economy? Or is it still the economy, stupid, but we are missing something and if so what?

If the answer is simply that the economy no longer matters, then we have no reason to be puzzled by the polls, and we may as well be reconciled to a Trump victory in November. But if, like me, you find it hard to think the economics-to-voting link no longer exists, what could the explanation be?

I have three suggestions, neither of which I can defend with enough conviction to hope to be entirely persuasive.

One is blaming the media: people think the economy is doing worse than it is and are intending to vote accordingly (against the incumbent). But surely people do know what their real wage is.

Another is that it’s the polling that is misleading. That’s easy to say and hard to substantiate, because I know of no indication pollsters are doing their work less well than they used to. (Although there is a case being made that more biased polling is being “weaponised”.) But I do want to cast our minds back to the 2022 midterm election, where the polls made a lot of people whose understanding of US politics I had previously deferred to, expect a “red wave” Republican triumph that never materialised (as you will remember, the GOP barely retook the House and failed to take the Senate).

When I dug into the election results back then, I saw signs that Biden’s economic policies did indeed bear electoral fruit. It has made me much more cautious about US polling since. Could conventional wisdom be blindsided again in November? If so, we’ll gloat that “it’s still the economy, stupid”.

A third possibility of saving the economics-to-voting link is that it’s not the polling but the economic data that is off. Not that the outcomes I described above haven’t happened, but that these are not what most give people a sense that the economy isn’t working. What could it be instead? My best guess is that even though most Americans have seen constantly rising real wages since the pandemic, they still have good reason to see the economy as a broken system that is stacked against them.

An intriguing new study suggests that people’s unhappiness with the economy does not come down to the sort of outcomes I listed above. Instead, there is a deeper, older and presumably harder-to-remove sense of being disempowered, as individuals cannot insure themselves against uncertainty or protect themselves against the greed of others. This is surely linked to the growing feeling of being taken advantage of by Big Tech, which Cory Doctorow sets out so well in his thesis about “enshittification”.

As my colleague Rana Foroohar described it in her excellent column this week, the economic malaise comes from recognising how concentrated economic power has become. And so the economics-to-voting link may well remain strong, but people will try to vote for whoever they think is most likely to break up that concentration of power. The paradox is that Biden has done more than anyone since Franklin D Roosevelt to move in that direction. But the pretend iconoclast of real estate heir Trump has the better rhetoric on wanting to break things up.

So my takeaway is that it’s still the economics, stupid. But it is understandable, if frustrating, that people do not dare to believe that the all-too-rare case of an ultimate establishment figure belatedly committed to radical reform — which Biden is, like FDR before him — can be for real.

Other readables

• There are lessons to draw from the seeming performance of Russia’s economy — but not what President Vladimir Putin would have you think, I argue in my latest FT column. And here’s another sign of decline to add to those mentioned in the piece: Moscow is postponing a lot of ambitious road-building projects.

• It’s a US election year — and perhaps the country’s most consequential election ever — so get prepared by signing up to our new newsletter, US Election Countdown.

• Could a hydrogen economy be built by extracting naturally occurring hydrogen from the Earth’s crust? Geologists are starting to say a hydrogen gold rush is possible.

• Poland’s Prime Minister Donald Tusk has taken an iron broom to clean up the previous government’s desecration of the rule of law. How is it going?

• My colleague Chris Giles has written an excellent column on how to get the European economy to perform better — in which he, with great reluctance, conditionally joins the high-pressure economy fan club.

Numbers news

• My colleague Paola Tamma takes the pulse on the EU’s post-pandemic recovery fund.

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