What do we think about the economy and why is it still an issue? Ari Shapiro’s All Things Considered panel interview with Lael Brainard

In 2016, 46% of Democrats had a more positive than negative view of the economy, according to Pew. In 2020 under Trump, Democrats grew more pessimistic, but only by 7 points.

Lael Brainard, the director of the National Economic Council, talks to Ari Shapiro on All Things Considered about what the numbers show about inflation and why it’s still an issue.

Ari Shapiro: When you look at this new data, unemployment is extremely low; wages are growing; job creation is strong. So what do you think are the biggest challenges right now? What’s the number one problem that you’re focused on trying to solve?

Brainard: That is a really notable feature, I think. Again, if you think about some of the doom and gloom three years ago, people were talking about the Great Resignation, saying that women – particularly women with children – wouldn’t be rejoining the labor force. But instead, what we’ve seen is a rebound in labor force participation for women overall, but particularly for prime age women, and that is in those prime working years of 25 to 54. And that includes mothers with young children. It’s a reflection of the policies the president put in place to make sure that people have access to child care at a time when a lot of centers were facing challenges. But it’s also true because there’s more flexibility in how many Americans are able to work right now.

Shapiro: So despite the strong job market and rising wages and falling inflation, Americans do not think the economy is good. A majority of respondents told Gallup last month that they think the economy is getting worse, and that has been the case for almost every month of Biden’s time in office. How do you account for this disconnect?

There is a brainard. Well, while the jobs picture is very bright, we know that many Americans are worried that some things are not affordable. And that’s why the president is so focused on fighting to bring down costs for hard working Americans. The president is trying to lower health care costs because he believes that prescription drugs are too expensive for many Americans. He got great legislation to cap insulin costs for seniors at $35 a month. $400 is what it’s down for. We are capping out-of-pocket drug costs for seniors at $2,000 per year. And Medicare has the authority now to negotiate prices, starting with 10 drugs next year.

The person is Shapiro. And yet, do you think when roughly three quarters of Americans tell Gallup the economy is getting worse, it’s because of something like insulin prices? I mean, the question seems to be broader than that, and I would think the answer comes from a sentiment that’s broader than that.

It’s a brainard. Well, actually, this morning we saw a really big jump up in consumer sentiment in the Michigan survey. Consumers tend to focus on the costs that matter most to them. Health care is a huge affordability issue for so many Americans. But consumers are also tired of being hit by hidden fees. That’s why we’re cracking down on junk fees in everything from airline ticketing to credit cards to overdraft fees. Corporations need to be passing on the savings from fixed supply chains and input costs to consumers now that they are cheaper. And we think that will go a long way to continuing that increase in consumer sentiment that we saw today.

The Rise and Fall of the Food and Inflationary Landscape in the 21st Century: The Party-Line View of the U.S. Economy

Friday’s jobs report exceeded expectations. Almost 200,000 jobs were created last month and unemployment dropped to 3.7%, which is near full employment.

200 million people have spent between Thanksgiving and Cyber Monday, which is higher than any time before and the most ever.

Inflation, which has led to higher grocery and gas bills than Americans would like, is partially to blame for souring their moods. But there’s more going on here.

There is a huge divide by party on the question of the economy, and there’s a stark switch that’s been taking place when there’s a new administration. And this party-line view of the economy is particularly noticeable among Republicans.

In 2016 when Barack Obama was in office, less than half of Republicans thought the economy was either good or excellent.

Consider: During Obama’s tenure, the economy was still recovering from the Great Recession, but unemployment by the time Obama left office was at 4.7%. The unemployment rate fell to 3.5% by February 2020, but that wouldn’t explain the 63-point increase in Republicans’ vote during Trump’s time in office.

The fact is inflation is one of those things people can see — they see it on massive signs at gas stations and on their grocery bills. Overall inflation after the pandemic began to rise and hit a high of 9.1% in June of last year. But food inflation was an even higher 11.4% last summer.

That meant that things like steak, bacon, eggs, cheese, potato chips, coffee, ice cream and cookies were more expensive. All are household items and noticeable every time someone checks out at the store.

Overall inflation and food inflation have both come down significantly since the start of the year, from 6.4% overall to 3.2% in October and from 10.1% to 3.3% for food.

There’s been an especially sharp decline in food inflation since the summer, but that hasn’t necessarily meant prices have come down much, if at all, and Biden isn’t seeing any political benefit — 67% disapproved of Biden’s handling of the economy in the latest Gallup survey, which is similar to other recent polls’ findings.

Housing costs in many parts of the country remain high, and one of the reasons for inflation coming down is because the Federal Reserve hiked interest rates substantially, making the ability to afford a home significantly more difficult.

Biden and his campaign team have to hope that inflation continues to recede, the Fed starts to lower rates, and people feel a loosening of the pinch on their wallets in an election year, because right now this issue makes Biden especially vulnerable for reelection.

Source: The economy is a trouble spot for Biden despite strong signs. Here’s why

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