The Biden Economy.

            President Joe Biden will soon announce that he will run for a second term.  Here’s the Democratic best-case interpretation of the performance of the Biden Administration during its first two years in power.[1] 

            In the view of Brian Deese, the chief economic official in the White House, the Biden Administration has performed very well, if not flawlessly.  The Administration’s 2021 stimulus bill promoted a “strong and equitable economic recovery.”  The Biden Administration also has “invested” in a wide range of industrial and infrastructure initiatives.  Many of these initiatives can be designated as climate-related.  Furthermore, the administration also has launched a hodge-podge of other policies which have not yet born fruit, either sweet or bitter.  Chief among these have been an attack on corporate concentration and talking-up the value of labor unions. 

            There have been failures as well.  Running for office during the Covid emergency, Candidate Joe Biden promised his voters all sorts of new government benefits.[2]  President Joe Biden could not entirely deliver on his promises.  He did deliver a big temporary increase in the child-tax credit. 

            Much more important has been the problem of inflation.  In Democratic reasoning, the American economy has turned in a feeble performance for much of the Twenty-first Century.  Therefore the 2021 stimulus bill erred on the side of optimism.  The Biden Administration did and could not anticipate the large and sustained rise in prices.  However, in the Democratic interpretation, the primary drivers of the inflation were the disruptions of the supply-chain and the spike in energy prices.  The former sprang from the Covid pandemic; the latter from Russia’s attack on Ukraine.  Neither of these could have been anticipated.  In any event, the error had only “somewhat limited consequences.”  Unless you were buying groceries or gassing-up the car. 

            Take a longer view.  The Clinton Administration (1992-2000) held office during—and claimed credit for—a boom/bubble in the tech economy.  Then that bubble burst just after the Bush II (2000-2008) took office.  Hot on the heels came 9/11.  The government poured in money and encouraged Americans to consume, rather than sacrifice for the war effort.  Then the long-ignored housing bubble collapsed.  First the Bush Administration, then the Obama Administration (2008-2016) poured in money to cushion the blow.  Apparently not enough money, because the “Long Recession” dragged on.  Then the Trump Administration (2016-2020) applied big tax cuts and deregulation.  Democrats ridiculed the resulting boom as a ”sugar high.”[3]  Then came Covid and more heavy government spending, first under the Trump Administration and then under the Biden Administration (2020- ). 

            So, in what kind of shape is the long-term private economy?  It looks like many of the spikes in economic activity spring from government stimulus in one guise or another.  If so, then the performance of the underlying “real” economy may not be too solid.  Economists offer complex analyses of this issue.  In layman’s terms, however, the stimuli seem like nostalgia for a bygone age of American economic prowess as much as emergency economic policies. 

[1] David Leonhardt, “Assessing the Biden Record as His Economic Team Transitions,” NYT, 23 February 2023. 

[2] Universal pre-K, paid family leave, expansion of the child tax-credit, and increased elder care.  At the same time, Biden endorsed many government programs to counter climate change. 

[3] Although it isn’t clear why deficit-expanding tax cuts create that “high,” while deficit-expanding spending doesn’t. 

American Divisions.

            In 2008, before the financial crisis and the subsequent “Great Recession,” the average real GDP of Democratic ($35.7 billion) and Republican ($33.3 billion) Congressional districts stood pretty close together.  Now, almost two thirds (63.6 percent) of the country’s GDP is produced in Congressional districts that vote Democratic; a little over one-third (36.4 percent) of the country’s GDP is produced in Congressional districts that vote Republican.  The average real GDP of Democratic Congressional districts has risen to $49.0 billion, while Republican districts have actually fallen slightly to $32.6 billion.[1]  That is, Democratic districts enjoy an average GDP that is fifty percent higher than Republican districts.  This is reflected in median household income.  In 2008, the median household income in Republican and Democratic Congressional districts was $53,000.  By 2017, the median household income in Republican districts had declined to $51,500, while in Democratic districts it had risen to $62,000. 

            Whether one looks at finance and insurance[2] or at the professions[3] or at the digital industries, Democratic districts represent about two-thirds (64.3-71.1 percent) of jobs.  Whether one looks at basic manufacturing or primary products, Republican districts represent more than half (56.4-60.5 percent) of the jobs. 

            Other measures mirror this economic divide.  In 2008, the median percent of adults with a BA or higher stood at 25 percent in Republican districts and 27 percent in Democratic districts.  By 2017, the medians had moved farther apart to 27 percent in Republican districts compared to 35 percent in Democratic districts.  In terms of location, in 2008 the median population density in Republican districts was 350 people per square mile, while the median population density in Democratic districts was 850 people per square mile.  By 2018, the rates stood at 200 people per square mile in Republican districts and 2,500 people per square mile in Democratic districts. 

            In the presidential election campaign of 2020, Joe Biden pulled in $486 million in campaign donations from ZIP codes where the median income was at least $100,000, while Donald Trump raised $167 million.[4]  Indeed, from households earning $75,000 a year to $150,000 a year, Biden out-raised Trump by $600 million to $300 million.  In contrast, Trump outraised Biden in ZIP codes below the 2019 national median income by $53.4 million.[5]  Among those earning up to $75,000 a year, Trump out-raised Biden by about $400 million to about $340 million.  

In ZIP codes where at least 65 percent of people had a BA or higher, Biden out-raised Trump $478 million to $104 million.  From among the ZIP codes were 40 percent or fewer of people had BA degrees, Trump out-raised Biden by about $400 million to about $350 million. 

            It looks like the Democrats are becoming the party of rich, educated people telling poor people what they need, while the Republicans are becoming the party of faux common men giving poor people what they want.  “Good and hard,” to quote Menken. 

[1] Aaron Zitner and Dante Chini, “America’s Political Polarization Is Almost Complete,” WSJ, 20 September 2020. 

[2] Basically moving around big pools of other people’s money. 

[3] Medicine, law, higher education, and scientific research. 

[4] Shane Goldmacher, Ella Koeze, and Rachel Shorey, “Map of Donors Reveals a Split On Class Lines,” NYT, 26 October 2020. 

[5] In 2019, median household income was $68,703.