Biden can overcome perception gap on economy, top adviser says

Monitor Breakfast

Lael Brainard is adamant: The United States economy has improved markedly since the twin shocks of the pandemic and Russian invasion of Ukraine, and sooner or later, Americans will notice that.

But President Joe Biden’s top economic adviser acknowledges there’s still a perception gap. Recent opinion polls show about two-thirds of Americans view the president’s handling of the economy negatively – a potential hindrance to his reelection in 2024. 

At a Monitor Breakfast on Thursday, Dr. Brainard, director of the White House’s National Economic Council, lists the positives: The price of gas is down by $1.40 since its peak. Some grocery prices are coming down, and the inflation rate has declined by more than half – from 9.1% year over year, to 4%, as measured by the consumer price index. Jobs are plentiful, as seen in the low 3.7% unemployment rate for May. 

But doesn’t inflation – still double the 2% rate the Federal Reserve is aiming for – trump everything?

“Having a job trumps everything, and having a good job is very, very important,” she says. “So it’s the full picture. People have better net worth. They have more financial resilience. And yes, they experienced a burst of high prices, particularly at the pump, associated with the war, and supply chains being scrambled. But those prices are now normalizing, and inflation has come down a lot.”

Dr. Brainard also sounds a more optimistic note on “core inflation” – which excludes food and energy prices – than does her former boss, Federal Reserve Chair Jerome Powell. On Wednesday, the Fed chair said he didn’t expect core inflation to reach 2% until 2025. But Dr. Brainard said Thursday that, within the range of forecasts, she could see core inflation declining to 2%, or slightly above, before the November 2024 election. 

“There’s every reason to think that that’s possible,” she says, citing forecasts that housing costs – a key element of core inflation – will decline considerably in the second half of this year. 

As if to put an exclamation point on her remarks, the Commerce Department reported Thursday morning that economic growth for the first quarter of 2023 was adjusted upward to an annual rate of 2%, nearly double the preliminary report of 1.1% issued in April. 

“It’s hard not to conclude maybe, maybe the economy’s actually kind of resilient and kind of chugging along, doing pretty well,” Dr. Brainard says.

The Harvard-trained economist joined the Biden White House in February after nine months as vice chair of the Federal Reserve and almost nine years as a member of the Fed’s Board of Governors. Now in a political role, she can be more of a cheerleader for “Bidenomics” – and she didn’t hesitate to defend the term that Mr. Biden himself had treated with some ambivalence until this week.

“He stood in front of how many banners, five banners, yesterday?” Dr. Brainard said of Mr. Biden’s economic address from Chicago on Wednesday. 

“Bidenomics” has come to stand for the president’s rejection of the tax-cuts-for-the-wealthy “trickle-down economics” of the Reagan era and support for policies Mr. Biden says will expand the middle class. 

One major Biden initiative – student debt forgiveness of up to $20,000 for millions of Americans – remains before the Supreme Court, with a ruling expected this week. Dr. Brainard declined to reveal any White House contingency plans in the event the program is struck down. 

Following are more excerpts from Thursday’s Monitor Breakfast, lightly edited and condensed for clarity: 

If Mr. Biden wins a second term, can you foresee his administration taking on longer-term issues, such as the labor shortage – including immigration reform – and the national debt? 

That would certainly be the president’s plan. And he has laid out the tenets of comprehensive immigration reform. It would be great to see some progress on that. We are actually seeing a normalization of the role of immigration in the labor market. So after a period of very depressed foreign-born participation, it’s actually improved in the last two years, I think. 

Secondly, it would be so important for the country’s future to have a good, balanced conversation about even more fundamental fiscal reform. The president has put on the table $2.5 trillion in additional thoughts and proposals, [and is] very specific in his budget about creating a fairer tax system. But I think having that discussion in a kind of balanced way would be so important for the fiscal health of the country.

What more can be done to address public unhappiness with the economy? 

The most important thing that we can do is deliver. We’re in an unusual position of having very significant legislative achievements that allow continued, very robust delivery all around the country.

You’ll see that [in] the number of Cabinet secretaries and White House officials every day that are traveling to announcements, where they are welcomed by local officials, because there’s a groundbreaking or a ribbon-cutting, or the letter that the president received about a person in a rural community who’s going to put his picture above her router, because she finally has high-speed internet connection. He didn’t want to talk about that in his speech, but I like to talk about that.

That’s our focus, making sure that middle-class Americans are in a stronger economic position with better job opportunities, with the ability to get training, and also with more confidence that some of those key industries and their infrastructure are actually going to see the government being a partner to the private sector, rather than pulling back completely. 

What responsibility does the Biden administration have to help U.S. companies that face a backlash over Biden policies, such as China’s ban on Micron Technology memory chips? 

The economic relationship with China is complex. China has really played a complicated role in the global trading system for a long time now. There’s been a number of practices that they’ve engaged in that have led to the loss of technology and intellectual property. So it’s very important when we look at sectors where we have national security and economic security interests, that we take a very targeted approach. And we have been clear – de-risking, not decoupling. 

It is important to make sure that we are carefully protecting key technologies that are vital for national security purposes. And of course, we work with all companies to try to strike that right balance. This is not specific to the U.S. You’ll hear friends and allies around the world talking about de-risking, not decoupling.