It’s the Economy, Stupid - Sort of

What really counts, to Biden’s dismay, is how consumers feel about it

A potential agreement on the debt ceiling is within reach - maybe. As a public service for those of us who hope this removes a big cloud over President Biden’s chances for re-election, allow me to be a big, fat, wet blanket.

Biden’s approval numbers haven’t reached the mid 40s in a year and a half, in large part because Americans don’t like how he’s handling the economy. A recent Associated Press-NORC Center for Public Affairs research poll was typical. Only 33% approve of Biden’s performance on the economy.

The debt ceiling crisis had - and still has - the potential to sink those marks further, which explains the glee from Republican House members over the debt ceiling negotiation slog. But as I’m about to show you, Biden needs to do better than stabilize his economic performance numbers. He needs to improve them substantially - or do something no incumbent has accomplished in a couple of generations - win re-election in the face of poor consumer confidence.

The upper line on the chart shows consumer confidence, as measured by the University of Michigan Consumer Sentiment Index, in the fourth quarter of every presidential election year since 1980. The numbers in the chart body show the Index at a few key points. The lower line shows the incumbent party’s percentage point margin in the popular vote.  

The big green dots show when the incumbent party won the popular vote (though the incumbent Democrats lost the Electoral College votes in 2000 and 2016). The red dots show when it lost.

Run your eyes across the chart, and you’ll see an Index of 75 or lower has meant doom for the incumbent party. In fact, only Barack Obama in 2012 (Index = 79.4) won for the incumbent party with an Index below 90.

At the start of April 2023, the Index was at 64.6 - not much better than the way consumers felt during The Great Recession.

Why such a dour outlook? The economy has been creating new jobs at a pace far faster than anything we saw under Donald Trump or Obama. The answer, of course, is inflation. But even there, the monthly inflation rate has been almost cut in half since it peaked at 9.1% in June 2022.

Biden supporters and critics can find hope in this chart.

The critics’ view: Most American voters care a lot about inflation and less about job creation. Despite the progress since last summer, inflation is still too high. Even if it continues to drop in the coming months, we might slip into a recession, which isn’t likely to make Americans happier about the economy. Whether the GOP nominee is Trump or someone else, he or she will have an easy path to persuading voters to try someone new to manage the economy.

The supporters’ view: The chart might cover 40-plus years, but that’s only 11 elections. You can’t draw too many conclusions from 11 data points. But even if you think Biden needs a Consumer Sentiment Index in the 80s to have a decent chance, it takes a while to turn around the consumer confidence ship. Americans are noticing that inflation has slackened. They’re not impressed - yet. But if inflation drops another point or two, and the economy avoids a major recession, it’s not hard to imagine voters growing more optimistic and softening their harsh opinion of Biden as our economy’s captain.