The Biden scorecard

SPEAKER_1 (0:01)

Bonds are back.

And so is All the Credit, P. Jim Fixed Incomes Monthly Podcast Series. From the latest trends to long-term perspectives, you'll get timely fixed income insights from leading economists, research analysts, and investment professionals. Whether you're new to bonds or a seasoned investor, tune in to All the Credit wherever you get your podcasts. This podcast is intended solely for professional investor use. Past performance is not a guarantee of future results.

Ethan Wu (0:36)

Thank Pushkin.

On this show, we are not too often interested in politics, but sometimes politics is interested in us. The US election is 13 months away, and Democrats and Republicans are arguing about the state of the economy. That's our turf. Democrats say, the economy is great. Republicans say it's the worst economy ever. Which is it? Today on the show, we're gonna ask, how good is Joe Biden's economy, really?

This is Unhedged, the markets and finance show from the Financial Times and Pushkin. I am reporter Ethan Wu, joined today in the New York studio by uncle at the table shaking his fist, Robert Armstrong.

Robert Armstrong (1:13)

It's true, I am the weird uncle of American financial commentary.

Ethan Wu (1:19)

You at least help clear the table. That's what matters at the end of the day. All right, Rob, on today's show, we have divided the aspects of Joe Biden's economy into two segments to give the kind of Biden balance sheet.

Assets on the one hand, the good things, and liabilities on the other hand. What's not going right? Do you want to start with the good news or the bad news?

Robert Armstrong (1:38)

I think the bad stuff is more fun.

Ethan Wu (1:41)

Okay, bad news it is. On the liability side of the balance sheet, we've got real wages, energy and gas costs, housing costs for people that don't currently own homes, and what the market's done.

Maybe we can start with real wages. I mean, to me, that's kind of the biggest theme of Joe Biden's economy is he ran the economy hot. He did a lot of fiscal stimulus. The Fed helped out with low interest rates, and that very potent combination of low interest rates and a lot of fiscal spending, it led to an economy where output was growing really fast and there were a lot of jobs being created, but also there's a lot of inflation.

Robert Armstrong (2:15)

Now, nerds like you and I, Ethan, can argue for quite a while about how to measure inflation or how to measure incomes. But I think we know that however we measure them, what we're gonna find is it's about a wash. In other words, prices so far in the Biden presidency have moved up 15, 20%.

Incomes wages have moved up about 15, 20%. Of course, that's distributed unevenly across the economy and everything else, but it's roughly a wash.

Ethan Wu (2:46)

So if we agree that wages and prices have more or less roughly kept up with each other, I mean, shouldn't that be a neutral, right? Like if they cancel out, people are about as well off today as they were in January, 2021 when Biden was inaugurated.

Robert Armstrong (2:59)

It's absolutely not a neutral. It is a strong negative. And that is because people are loss averse, meaning losing something hurts them more than gaining something helps them or makes them feel good. So in this case, our median voter walks into the quickie mart, observes the price of Twinkies, sees them up by a fifth and thinks, damn that Joe Biden, then they head off to their job, where they're over the last couple of years, their wages have increased by 20% and they think, damn, I'm a good worker.

Man, I deserve this 20%. So I think the real wages picture is a definite liability for Joe Biden.

Ethan Wu (3:45)

And to your point, and this gets us into our next point about gas prices, but at the peak of the gas price increase in Biden's administration, there were all these stickers that people would put up on gas stations by the gas price, a picture of Joe Biden pointing at the gas price saying, I did this, right? Nobody does the equivalent for their W-2.

Where it's Joe Biden saying, I did this. No, it's the worker that did that.

Robert Armstrong (4:06)

Yeah, and the gas price, which is the first thing many people think of when they think of the economy, their mind immediately goes to the gas price, very visible price that has a strong incremental impact on the family budget.

Not only is it like 60 or 70% higher than the day that Joe Biden was inaugurated, but it's been an incredibly volatile path along the way. And I think that volatility itself, that unpredictability, adds another negative aspect to the whole situation.