The recent unexpectedly fast drop in inflation is good news for President Joe Biden as the White House works to highlight “Bidenomics” and improve his poor economic approval ratings ahead of the 2024 campaign.
Once a pejorative given the country’s historic and painful inflation, the White House is attempting to reclaim the phrase Bidenomics. In past months, it was difficult to pitch the economy being in good shape given high inflation, but two new reports this week have put some wind behind the administration’s sails.
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Thursday’s producer price index, which measures wholesale prices, showed inflation clocking in at 0.1% for the year ending in June. A day before, the June release of the consumer price index, which is even more closely watched, showed inflation falling to a 3% annual rate, notching a decline of a whole percentage point from the preceding month.
Democrats are hoping to use the lower inflation readings and other positive aspects of the economy to bolster their case for remaining in the White House in 2024. The party is tethering the falling inflation to the strong labor market and trying to emphasize the relative economic strength of the country to voters.
“Working families across the country are getting much-needed economic relief as inflation continues to slow, wages are rising, and unemployment is at near historic lows — all thanks to the work and policies passed by President Biden and House Democrats,” Democratic Congressional Campaign Committee spokesman Viet Shelton told the Washington Examiner.
Economist Justin Wolfers, a senior fellow at the Brookings Institution, said the new reports show that inflation is finally “coming under control.” He said the results were even better than economists had anticipated.
“Inflation 12 months ago was 9%. That wasn’t normal, you could even call it a crisis. Inflation for June of this year was 3%, that’s remarkably close to normal,” Wolfers said. “The average inflation rate in the 21st Century I think is either 2.5% or 2.6%, so we’re within a sneeze of normal.”
The lower inflation is coupled with low unemployment and a tight labor market. The economy added 209,000 jobs in June, the Bureau of Labor Statistics reported last week. The combo of falling inflation and low unemployment will undoubtedly be hailed as a one-two punch by the Biden messaging team.
“What a beautiful economic miracle. We not only have inflation falling and falling while unemployment is low — remember, unemployment is at its lowest rate in half a century — we’re continuing to create jobs and so on the current trajectory unemployment is likely to keep falling even as inflation is likely to keep falling, so two great tastes that go even better together,” Wolfers said.
Biden in a statement after Wednesday’s CPI report touted the latest inflation news as “Bidenomics in action.”
Skanda Amarnath, executive director of Employ America, a group that advocates full employment, said the timing of the Biden administration’s Bidenomics push was likely strategic. It was expected that the June CPI report would return a lower headline annual inflation number simply because the massive spike in the month of June 2022 fell out of the calculation of the yearly number.
“That number will go up in the coming months, just because of the way year-over-year calculations work, this stuff is kind of baked into the cake,” he said.
Amarnath said that the better news than the headline 3% number is the data that are “less noisy” shows inflation slowing down. For instance, core inflation, which strips out the volatile food and energy categories, fell more than expected, from 5.3% to 4.9% in June.
Still, despite the rosy talk about declining inflation from Democrats and the Biden administration, Republicans have bashed Bidenomics and the framing coming from the White House. Some conservatives have argued that inflation wouldn’t have gone as high in the first place had there not been the massive infusion of federal stimulus spending early in Biden’s term.
“It will take American families and workers a long time to recover from Bidenomics as they struggle with the reality of higher costs for everything,” said Republican National Committee Chairwoman Ronna McDaniel. “Voters will make Biden a one-term president because he continues to lie to Americans and refuses to take responsibility for his failed agenda.”
While Biden’s economic approval rating has been quite negative throughout much of his tenure, Rep. Jake Auchincloss (D-MA) contends that voters will begin to see the economy in a different light.
“The key issue is real wages. That is, nominal wage growth minus inflation. Real wages are starting to rise. I expect voters’ perception of the economy will rise along with them,” he told the Washington Examiner in a statement.
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Lael Brainard, the director of the National Economic Council, addressed the positive inflation news during remarks before the Economic Club of New York this week. Brainard, the former vice chairwoman of the Federal Reserve, pointed out the dynamic between inflation and employment and how the current trajectory of both has defied the expectations of many economists.
“The economy is defying predictions that inflation would not fall absent significant job destruction. Just today, we saw new and encouraging evidence that the U.S. economy is on the path to moderate inflation accompanied by a resilient jobs market,” she said.
