The state of our union is strong. That’s true in economic terms at least, as President Joe Biden is sure to argue at his State of the Union address tonight. Unemployment is lower than at almost any other point in modern history, and the economy is growing at the fastest pace since 1984. Americans’ earnings have increased across the board, with growth particularly strong for the working class. The country’s poorest families have 65 percent more cash in their bank accounts than they did in 2019.
In the recent past, numbers like these tended to translate into lofty presidential-approval numbers, soaring consumer confidence, and a majority of Americans saying the country was headed in the right direction. Not anymore. Biden is unpopular, and getting particularly poor marks on the economy. Consumer sentiment is at its lowest level in a decade.
The economy is booming and people feel terrible. This strange situation is born of strong partisanship, complicated economic factors, changes in voter ideology, and the broader state of the world. The Russian invasion of Ukraine might lead to a rally-’round-the-flag effect for the president. But for now, the disconnect between economic conditions and public opinion poses a formidable challenge for Biden’s party: Democrats must convince voters that their lives are better than they think.
One central reason Biden’s approval numbers are so low, despite the good economy, has nothing to do with the economy itself. It’s simple partisanship. In the decades after the Second World War, economic figures and presidential-approval ratings tended to move in tandem. But as party elites have moved toward the ideological extremes and Republicans and Democrats have drifted into different media universes, voters have started viewing the economy through an intensely political lens. People tend to think the economy is good if their guy is in office and bad if their guy is not.
The gap between Democrats’ and Republicans’ consumer expectations rose from roughly 20 to 25 points during George W. Bush’s and Barack Obama’s presidencies to more than 50 points during the Donald Trump and Joe Biden years. The partisan divide dominates “rational assessments of ongoing economic trends,” argues the economist Richard Curtin of the University of Michigan. Voters now use different baselines depending on their partisan affiliation, he told me, “with Democrats using the Trump pandemic low and Republicans using the pre-pandemic Trump peak” to evaluate how things are going.
Republicans might be feeling worse than Democrats, but Democrats aren’t feeling great either, notes John Sides, a political scientist at Vanderbilt University. Indeed, Biden’s presidential-approval ratings are more tightly correlated with consumer confidence than Trump’s or Obama’s, in part because of Democrats’ dissatisfaction with how things are going. The chaotic withdrawal from Afghanistan, the Delta and Omicron coronavirus waves, the sputtering of the Democrats’ election-reform and social-infrastructure bills, and, perhaps most of all, the false assurance that inflation would be “temporary”—all of those factors led Democrats and moderates to turn on Biden. “There’s no way for Biden, and Democrats generally, to offer a counternarrative that’s going to be as attractive as the bad news,” Sides told me. “It’s been very hard for Democrats to feel optimistic.”
Why should anyone feel optimistic? To state the obvious, there’s a war in Europe and a pandemic here at home. Democracy is fraying and the climate crisis continues unabated. The news, whether relayed by nonpartisan, hard-left, or hard-right sources, has been unremittingly negative of late. “Ask anyone with an IQ whether this is a good world to be in,” Diane Swonk, a macroeconomist at Grant Thornton, an accounting and advisory firm, told me. “Context matters.” Financial issues have become less important to voters: Just one in five people considers economic problems the most important problems facing the country, down from four in five during the Obama years.
Economic ambiguity matters too. During Obama’s presidency, the economy was worse than the headline numbers implied, because of income inequality: Rich families rebounded from the Great Recession far sooner and far better than poor families did. During the Trump years, the great affordability crisis, with rising housing, child-care, and medical costs, as well as student-loan debt, also dampened consumer sentiment. America is still unequal. Child-care, education, housing, and medical costs are still growing. And families now face spiraling inflation: Consumer prices are rising at the fastest pace since 1982, with Russia’s invasion of Ukraine nearly certain to worsen the situation.
Twenty bucks more on groceries, a hundred more on rent, a thousand more for a used car. Such price increases add up, and hit low-income families much, much harder than high-income ones. Bigger shares of poor families’ budgets go to necessities, and it is easier for the wealthy to trade down or comparison shop. (Switching out Whole Foods for Safeway is simple; switching out Family Dollar for anything cheaper is close to impossible.) “What we’ve got is a hot economy where people are getting burned,” Swonk said.
A caveat here: Many families, including poor families, are better off financially now than they were a year or two ago, even after accounting for sharply rising prices. Households are spending more in 2022 because more people have jobs, workers are earning more money, and the government sent everyone checks. But not all families are doing better, and inflation is overwhelming wage gains for many.
The price of gas poses a particularly potent threat. Fuel makes up a huge chunk of family budgets. It is an unavoidable expense for many Americans living in car-dependent areas. High prices at the pump jack up the cost of everything else. Gas is already more than $3.50 a gallon in much of the country (it is nearly $5 a gallon where I live), and prices are very likely to go up as Russia’s war on Ukraine intensifies.
The state of the economy is strong and weak, barely recovered and far better than it was, depending on which party you support. Biden faces the difficult task of stressing great jobs, earnings, and savings numbers while acknowledging the cost-of-living crisis and soaring prices, all while his domestic agenda has sputtered out and a nuclear crisis looms. The state of our union might be strong in some ways. Good luck convincing anyone of that.