Workers and the Biden/Harris economy

Of all the good news that Vice President Kamala Harris has received since replacing Joe Biden at the top of the Democratic ticket, perhaps none was more surprising than the finding that more Americans said they trusted her, rather than Trump, to steer the U.S. economy.

The difference that the monthly Financial Times poll found—42 percent say they trust Harris, compared to 41 percent trusting Trump — isn’t really significant. It’s more a tie between Harris and Trump.

But it was the first time the Democratic ticket was even in the running on this measure. And yet, for many liberal pundits, the fact that so many distrusted Biden on the economy was just a failure of Democratic messaging.

From a high level of macroeconomic indicators, the U.S. economy is, as an economist the Wall Street Journal quoted put it in April, “the envy of the world.” Of all of the advanced industrial economies, the U.S. has put up the strongest recovery from the COVID crisis of 2020-2021.

The lowest unemployment rates since the 1960s. The lowest rate of Black unemployment in 50 years. Wage gains from 2019 to 2023 to the poorest 10 percent of the working class surpassing those of more higher-income groups. A four-fold increase since 2021 in construction spending for manufacturing. These are all talking points that Biden/Harris partisans cite.

And still the incumbent Democratic president suffered from historic rates of unpopularity…and was probably on track to lose to Trump in November before he stepped down. It was enough to befuddle all of Biden’s key advisers.

But socialists aren’t so befuddled when taking a hard look at the reality of life and work in the U.S. From that vantage point, all of that economic glitter isn’t gold.

Start with the issue of real wages. An Economic Policy Institute study of national economic data going back to 1949 concluded that “Economic performance is stronger when Democrats hold the White House.” While the Biden administration is no exception, when compared to the Trump administration, one glaring statistic stood out.

That was “percent growth of real wages of production and non-supervisory workers”, which in non-statistical jargon, means workers’ wages, adjusted to show their buying power. Through the halfway point of the Biden administration, that figure stood at -0.42 percent, meaning that workers had lost ground. The only other administrations in which real wages declined were the Carter, Reagan and Bush I administrations—those in power when the employers’ offensive against labor and high inflation attacked workers’ living standards. On this statistic, Biden did worse than even Reagan and Bush.

It’s possible that the post-pandemic decline in inflation may end up pushing real wages into positive territory over the four years of Biden’s administration. But these facts are part of the explanation for why Biden wasn’t “getting credit” for the macroeconomic trends that most economists and politicians consider positive for incumbents.

It’s common for people to think about the price of eggs or gasoline when they think about inflation. But aside from prices for commodities like these, which do fluctuate with “supply and demand,” there are the long-term price increases of commodities and services that are essential to everyday life. Rent, housing, childcare, education and health care top the list here. Each of these has seen double-digit increases in real costs over the last several decades. This means that the everyday “background” expenses of life—especially for people under the age of 40—is a constant source of stress and debilitating debt even for people with decent jobs.

“This is the most money we’ve ever made and this is the brokest we’ve ever felt,” Nicole Lewis, a teaching assistant living with her husband and three children in Michigan, told the Wall Street Journal’s David Uberti.

Taking childcare as an example, journalist Annie Lowrey notes,

So childcare for [kids ages] zero to five, this is a cost that families are paying for relatively short time in their lives. And it is absolutely, absolutely crushing. Average childcare costs for a year are between $18,000 and $24,000. And the problem is not just with how much people are paying, it’s that people don’t pay. A lot of folks cannot afford that. And we do not have enough coverage through programs like Head Start. Head Start is severely underfunded. One in five kids who would qualify for Head Start, gets Head Start.

And so, folks drop out of the labor force. They rearrange their work schedules. They get family members to help. And the issue is that we have basically maxed out what people can afford to pay, and that still doesn’t mean that childcare workers who are among the lowest paid in American life have a living wage. Most childcare workers are still making $14 or $15 an hour. It’s just not enough.

In a bout of COVID-stimulated experimentation, the Biden government’s 2021 American Rescue Plan provided tax subsidies to working families. These had the dramatic impact of cutting child poverty in half in one year. But, in a bid to restore capitalist “normalcy” and to scotch any idea that working people should expect that their government might actually look out for them, the administration allowed the tax credits to lapse near the end of 2021. The predictable result was an increase in child poverty—to levels higher than they were pre-pandemic.

Biden scrapped plans for increased subsidies for childcare, universal pre-kindergarten, and increased wages for childcare workers as his “Build Back Better” plan became rebranded as the Inflation Reduction Act (IRA) in 2022. The IRA took some steps to address some costs, like the outrageous prices Americans pay for prescription medications. But the core of the IRA was billions in corporate subsidies and tax incentives to stimulate a transition to an electrified economy that can compete more directly with China.

The Biden/Harris recovery has also been highly unequal, despite the gains in employment income noted above. According to a measure that counts income including government assistance and taxes, the bottom 50 percent of the income distribution has increased its income by almost 5 percent, according to the EPI. But the top 1 percent has gained more than 10 percent. That is the highest return to that mega-rich slice of the population since the Reagan administration. Even wages among the lowest income workers, despite being the highest in decades, still place them at annual salaries—if they work full-time—of less than $30,000. US income inequality is more extreme today than it was in 1963.

It’s common to describe U.S. politics as “polarized,” but it’s also clear that the economic conditions for millions of ordinary people contributes to that polarization. It’s not just the reason for why the November election is a tossup despite the Biden-Harris “strong economy.” It’s also why millions feel that the major institutions of government and business are rigged against them, no matter which party is in power.