A year ago, few economists believed that President Biden could come before Congress and make the boast that he did last night: “I inherited an economy on the brink,” he said. “Now our economy is literally the envy of the world.”
Back then, many experts expected a recession. They worried that America’s central bank, the Federal Reserve, would have to crush the economy to reduce inflation. Instead, unemployment is near its lowest point in half a century. Wages have risen faster than prices. Inflation has come down to more manageable levels.
Before the biggest audience he’ll address until his nomination convention this summer, Biden was able to argue he had saved America from economic ruin. Today’s newsletter will look at the surprisingly strong state of the economy — and Biden’s role in its rebound. (Below, we also cover other highlights from last night’s speech.)
Yes, Biden may claim too much credit. Presidents don’t control the U.S. economy. But they also tend to receive too much blame when it struggles. And Biden’s approval ratings are weak partly because Americans have been unhappy with the high inflation of the past few years. Central to his campaign for re-election is an effort to persuade voters that the economy has turned a corner.
Biden’s contribution
Here is the case in favor of Biden’s handling of the economy: Compare it with the slow recovery that followed the 2007-8 financial crisis.
In response to that recession, the federal government underreacted. Congress passed stimulus measures that many economists now say were too small. Inflation didn’t rise, but the unemployment rate remained above 5 percent for nearly seven years after the downturn ended.