Kate Andrews
On the face of it, Joe Biden’s economy is booming. It was only a few weeks ago that the US reported provisional 4.9pc growth in the third quarter – the kind of figure a country might boast about in the good times, let alone when its economy is recovering from high inflation and fast-rising interest rates.
In the words of American economist and Federal Reserve Governor Christopher Waller, the numbers alone indicate a “blowout” performance from the US economy, overseen currently by a president who continues to insist that mass spending and state intervention is the recipe for impressive economic growth. Still, Americans aren’t quite buying it.
It’s speculated that the US isn’t going to be able to sustain this level of growth – the fastest it’s seen in two years, since the country was in its immediate recovery from the pandemic. This third quarter may be an outlier, with growth driven by surprisingly resilient consumer spending, despite those rising rates. Other economic indicators would suggest tougher times ahead. October’s unemployment numbers for the US have led to quiet panic, as the rate rose to 3.9pc. That’s low in historical terms, but notably above the record-low levels of 3.4pc achieved earlier this year, and often a warning in America that the economy is taking a turn for the worse.
Despite good-on-paper figures, there is a growing feeling that the numbers are moving in the wrong direction. It’s perhaps a sign that those rate hikes are finally seeping through, being felt by employers and consumers, with all eyes on the evidence that will emerge leading up to Christmas. But perhaps most importantly, claims of increased prosperity and being “better off” don’t seem to be translating to your average voter. When it comes to the economy, in fact, Biden is in trouble. The 46th president pledged more than $1 trillion on the Inflation Reduction Act (which at the time was estimated to boost inflation slightly) at a time when it was clear far too much money had already been pumped into the economy – all in a crude attempt to secure some political leverage. Instead, he is forced to grapple with abysmal polling, which illustrates just how disappointed Americans are with the economy’s performance.
Polling from Gallup this autumn finds that only 20pc of Americans consider the country’s economic conditions to be “good”, compared to 60pc who consider those conditions to be either “only fair” or “poor”. Meanwhile, the vast majority of respondents fear the outlook for the economy is moving in the wrong direction, with 73pc reporting that they believe these conditions are getting worse, while only 24pc think they are improving.
This kind of doom and gloom perspective of American voters compares, Gallup says, to attitudes more than a decade ago, during the time of the financial crash. It seems, then, that despite splashing the cash – and creating a trillion-dollar sugar rush – Americans are still not very impressed with the Biden economy. And their verdict is being delivered at the same time as seemingly impressive growth rates. (Put an outlier third quarter aside: the country’s second quarter numbers are still at 2.1pc.)
Of course, these are the kinds of numbers that Rishi Sunak and Jeremy Hunt must dream of – yet are nowhere near realising. This week we learned that the provisional growth in the UK’s third quarter flatlined, which follows on from just 0.2pc growth in the second quarter. If the Government makes good on its promise to grow the economy this year, it is set to do so on a technicality: UK GDP remains stagnant while friends across the pond are racing ahead.
Britain is edging towards stagflation – with the inflation rate in the UK still almost double the US rate, unemployment slowly creeping up, and perhaps most importantly, growth at a standstill. The best news Britain can muster up is that it has avoided the technical definition of recession. Some will view this as cause for celebration – not least given doomsday predictions from the IMF, and others, at the start of the year. But the economy just staying on the right side of the recession line isn’t much to boast about.
Are Americans too demanding, expecting better economic conditions than what they have right now? Or are British expectations just dismally low, as they get ready to watch the Government hail some kind of victory for GDP growth that sits under 1pc? Wherever the answer, it is clear there is substantial opportunity on both sides of the Atlantic for more growth reforms. In the UK, policy announcements are already being framed in the context of a general election, but that process has not kicked off yet, and there is still time for the various parties to present their pro-growth agendas to voters. But in America, the far longer process is well underway, with Republican candidates (apart from Donald Trump, who refuses to show up) taking to debate stages across the country to put forward their vision for the country.
Unfortunately, minds are elsewhere. Between the shadow of Trump, the tempting allure of culture war issues and fighting yesterday’s battles (including some kind abortion ban across the US), the Republican candidates for president have failed to find the time to properly acknowledge voter concern about the economy and how they might address it. It’s a shame: recent polling from the New York Times and Siena College finds that Trump is currently leading Biden in key swing stages, including Arizona, Georgia, Michigan, Nevada and Pennsylvania (Biden is leading in Wisconsin).
But the real insight from this most recent round of polling is that while Trump may lead Biden by several percentage points, a “generic Republican” is no less than 14 points ahead (in Pennsylvania) up to 18 points ahead (Arizona). What does it mean to be a “generic Republican”? That’s debatable, but almost certainly includes a nod to the GOP’s history with voters of being fiscally responsible and energetic towards the economy. In America, Biden’s fragile, sugar-high good isn’t good enough – even if in Britain, Rachel Reeves’s equivalent might well be.
The Telegraph
