What Biden gets right - and wrong - about the American middle class

By Venessa Wong

The Democratic president is promoting a positive narrative about America's economic turnaround - but if he's viewed as downplaying widespread financial anxiety, he risks alienating middle-income voters

Middle-income Americans are expressing concerns about the U.S. economy, despite rosier economic data showing that inflation is slowing and the job market remains strong. President Joe Biden's campaign for re-election so far leans on a portrayal of his effective stewardship of a solid rebound from the economic disruptions caused by the coronavirus pandemic.

Yet, polls indicate, the daily experiences of many middle- and low-income Americans continue to contradict that narrative.

Although Biden boasted in his State of the Union address last week that "the American people are writing the greatest comeback story never told," one-third of respondents in Northwestern Mutual's 2024 Planning & Progress Study, released on Monday, say they do not feel financially secure. That's the highest measure of financial insecurity since the study started polling on that metric in 2012. Just over half of respondents said they expect a recession this year.

" 'Financial shock fatigue' and fragility are holding people back from positive feelings about their own financial security," Christian Mitchell, chief customer officer at Northwestern Mutual, said in a statement this week. "Despite the growing economy, Americans have had to endure one financial disruption after another over the last several years, and it's hard to feel positive when you don't know what's around the corner."

That presents a problem for Biden, who must acknowledge the fragile financial perspectives - and spirits - of many Americans even as he touts the economic wins of his first three years in the Oval Office. He walked that line in last week's State of the Union, and he will have to continue to tread carefully if he is to win in November. His success will depend partly on what his campaign messaging gets right and wrong about the American middle class and its expressed financial concerns.

It will be a challenge. The disconnect between Biden's highlighting of factors that voters indicate they really don't care about at the moment, like the jobs report, while de-emphasizing things that they do care about, such as the prices of everyday products, "makes it feel like the Biden camp thinks it is even illegitimate for people to be concerned about those things," said Patrick Murray, director of the Monmouth University Polling Institute. "Elections are won and lost on the voters who are in the middle. That's the kind of thing that backfires on you."

As Republicans point their finger at Bidenomics - as the economy under Biden has been dubbed, whether derisively or as an applause line - as the cause of recent affordability issues, the debate in Democratic circles has been over how much the president should acknowledge voters' pain versus emphasizing bright spots in the economy, said Tobin Marcus, head of policy and politics at Wolfe Research, an equity-research firm. Many voters are indicating they "look back fondly on the Trump economy before the generational surge of inflation we've experienced over the past few years," he said.

But, ultimately, "even if voters are feeling downbeat, I don't think it really pays for the president to tell a terribly downbeat story about the economy," Marcus said.

From the archives (July 2023): Morgan Stanley credits 'Bidenomics' in lifting its U.S. economic-growth outlook

Also see (February 2024): Bidenomics? More like Mr. Magoo, says hedge-fund manager Dan Loeb.

Plus: Why is the economy still growing? Because most workers don't fear for their jobs.

Although Biden must highlight positive economic shifts, odds are "he's not going to win on Bidenomics," said Stephen Myrow, managing partner at Beacon Policy Advisors, a policy-research firm. At best, he'll be viewed as on par with Donald Trump, the Republican former president, on these issues.

Gallup's latest poll shows just 36% of Americans approve of Biden's handling of the economy - dragged down, it must be noted, by an approval rating among Republican voters of just 4%. In addition, Gallup's respondents are evenly divided - 48% to 47%, respectively - over whether their own financial situation is worse or better now than in early 2020, when Trump was beginning his final full year in office.

"[Biden's] narrative on the economy has already been written. It's going to be very hard to change that now. People have associated him with this high-inflationary period," Myrow said.

Even though inflation has slowed significantly from record levels, consumer prices in February were up 3.1% on a year-over-year basis, slightly more than expected. In other words, while the inflation rate has nearly normalized, prices, for the most part, are not returning to their prepandemic levels. Even once inflation gets back to the Fed's annual target, 2%, it will take time for people to adjust and feel better, and Biden, with less than eight months till Election Day, Nov. 5, "doesn't have that time," Myrow said.

A downbeat financial outlook

The president boasted in his State of the Union address this month of "an economy [built] from the middle out and the bottom up," a record 15 million new jobs created in three years, unemployment at 50-year lows, a shrinking racial wealth gap and wages that "keep going up" as inflation "keeps coming down."

He cited studies that show "consumer confidence is soaring."

"The American people," he said, "are beginning to feel it."

And surveys do show that consumer sentiment has improved significantly since November and that people are "increasingly confident that the slowdown in inflation is going to stick," said Joanne Hsu, director of Surveys of Consumers at the University of Michigan.

Still, people's financial outlooks still haven't returned to prepandemic levels, according to the university's consumer-sentiment index. And middle- and low-income Americans consistently report worse sentiment than high-income Americans, who have been big beneficiaries of the latest stock-market boom.

Republicans have seized on comments by the president that they characterize as out of touch. Sen. Katie Britt of Alabama, in the official GOP response to Biden's State of the Union address, said, "The American people are scraping by while President Biden proudly proclaims that Bidenomics is working. Y'all, bless his heart, but we know better."

Those who agree with Britt's remark are likelier to earn relatively less. Just 28% of middle-income and 23% of low-income respondents said economic conditions today are excellent or good, compared with 38% of upper-income respondents, in a January survey by the Pew Research Center. Those who felt economic conditions were fair or poor were most concerned about inflation, citing a high cost of living and low wages.

Mounting credit-card debt and high housing costs

The economic challenges these voters face are clear to all. Housing costs have climbed to record heights: The median home-sale price at the end of 2023 was $417,000, up 20% from early 2020, while the median asking rent had jumped by 41% from early 2020 to $1,465, according to the Census Bureau. More renters than ever are now "housing-cost burdened," meaning that they spend more than 30% of income on shelter.

Credit-card balances have climbed to a new high of $1.13 trillion. Card and car-loan delinquencies are at the highest levels since 2011, especially among millennials and low-income consumers. And 36% of Americans have more in credit-card debt than they do in savings.

Graduates of public universities came out of school in 2022 with an average of $20,400 in student loans.

And in today's interest-rate environment, in order to afford a new car - which now costs an average of $48,000 - an annual income of greater than $100,000 would be required. Meanwhile, the median household income nationwide is $75,000.

Many Americans confront an unwelcome economic reality every time they shop for food, as grocery prices have increased 25% over the past four years. But that burden, too, is unevenly felt. Middle-income households spent 13.4% of their income on food in 2022, while low-income households spent 31%. Among upper-income households, meanwhile, food purchases, even at inflationary prices, accounted for just 8% of their income.

In part, the lingering pessimism reflects the fact that, even as the U.S. returns to normal in the wake of the pandemic, the new financial baseline is still difficult to bear for many.

Before the pandemic, workers faced decades of income stagnation, including a $7.25 federal minimum wage that hadn't changed since 2009, along with rising credit-card balances, unpaid student-loan debt and a housing-affordability crisis. A Pew survey in 2019 found that two-thirds of lower-income adults and one-third of middle-income adults worried almost daily about paying their bills.

The size of paychecks

Right now, people are primarily concerned about their incomes, "which for many haven't grown much in recent decades, even if they're doing better in the last couple of years," said Eugene Steuerle, a fellow at the Urban Institute.

The U.S. Treasury highlighted progress on that front in a December report. It found that between 2019 and 2023, real median weekly earnings (which are adjusted for inflation) have recently made up for cost increases and are now up by 1.7%, to an annualized rate of roughly $58,100 per year. The researchers concluded that the typical worker would have $1,000 more per year to spend or save than before the pandemic. Even so, the personal savings rate - savings as a share of disposable personal income - is now 3.8%, compared with 6.4% at the end of 2019.

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03-16-24 1701ET

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