This week in Bidenomics: Calling a bottom on the Biden presidency

I’m gonna set myself up here. Big time. In the next few paragraphs, I’m going to make the case for why Joe Biden’s presidency has hit its low point and is going to recover, a bit. Biden haters are going to bombard me with invective, claiming Biden is senile and whatever other trash Fox News has been running lately. Bring it.

A steady drumbeat of bad news has forced Biden’s approval rating below 39%, which is three points lower than Donald Trump’s approval rating at the same point in his term and about even with Jimmy Carter’s, in 1978. Among post-war presidents, only Harry Truman was doing worse than Biden in his 18th month.

Knowing pundits are writing epitaphs for Biden’s presidency. “Joe Biden’s presidency is sinking,” Daniel Henninger of the Wall Street Journal wrote on July 13, way after the sinking began. The Boston Herald thinks the Biden presidency has suffered a “final death blow.” If you don’t hear from Biden for the next two and a half years, you’ll know what happened.

Two factors tell most of the story

Biden’s slide is not mysterious. Voters thought Biden’s defeat of Trump in 2020 would return the nation to normalcy, including a decisive end to the COVID pandemic. COVID hasn’t ended, of course. It has morphed into a microscopic Demogorgon that seems like it could plague us forever. Perpetual bummer.

Worse, inflation. Prices have been on an upward tear since February 2021, or in other words, the first month of Biden’s presidency. The annual inflation rate seemed like it was going to flatline at around 5% last summer, but it didn’t. It rose by nearly half a percentage point per month for the last year, and now sits at 9.1%. Gasoline inflation has been far worse, with pump prices now up 60% year-over-year. That coincides fairly directly with Biden’s plunging approval rating.

Other factors have hurt Biden (the ugly pullout from Afghanistan last year) or helped him (the bipartisan infrastructure bill he signed in November). But COVID and inflation tell most of the story.

If those two factors have brought Biden down, it’s sensible to ask if he could recover if both become less of a problem. The answer ought to be yes. That doesn’t mean Biden’s approval will go shooting back up if COVID gradually recedes and inflation drifts back toward 5% or 4% or 3%. In fact, Biden’s approval may never exceed 50% again. But I’m not making the case that Biden will once again be widely popular. I’m only arguing that his popularity has bottomed out and is not likely to go any lower.

Inflation is the main reason. Nobody knows if 9.1% inflation is as high as it’s going to go, and inflation has been higher in the past. But it seems very likely that headline inflation, as it’s known, will be lower during the next couple of months, at least. First, as the Biden White House pointed out this week, the June inflation data reflects energy prices that peaked mid-month, when oil was around $120 per barrel and gas hit $5.02 cents per gallon. Prices have dropped considerably since then. Oil is now around $95 and gasoline is $4.60. Gas prices will probably fall further, because wholesale gas prices continue to go down and those usually pass through to the pump a couple of weeks later. So the energy prices that will determine the July inflation numbers are a lot lower than they were just a few weeks ago.

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Costs are flattening out in other important parts of the economy, including commodities such as copper and lumber. The faster-than expected recovery in late 2020 and 2021 created shortages of many wholesale and consumer products, since manufacturers had no idea demand would bounce back as strongly as it did. The prices of many commodities soared. The declines now suggest supply and demand are finally evening out.

Consumers are a lot gloomier than the state of the economy warrants, given that jobs are still plentiful and we’re most likely not in a recession. That gloom probably comes from the COVID-like bout of inflation, something many Americans have never experienced. Gas prices account for less than 3% of the typical family’s budget, but no consumer price is as widely advertised, and when gas prices start with a 4 or 5, people think something is terribly wrong.

So the odds seem good inflation will drop below 9% and maybe below 8% during the next few months. That will still leave inflation too high, but it will be movement in the right direction, rather than the wrong direction. There’s a big difference between a good situation getting worse and a bad situation getting better, and consumers may start to sense things are improving as gas prices drop and other price pressures ease. If consumer attitudes improve, Biden’s approval will start to creep upward.

We’ll probably be battling COVID in one way or another for some time. But there, too, people seem to be moving on, getting more comfortable with the risks as they become more familiar.

“As sixth COVID wave hits, many New Yorkers shrug it off,” the New York Times reported on July 12. If liberal, neurotic worrywarts in the big city no longer care about COVID, Americans in the hinterlands must feel home free.

Biden returns soon from a trip to the Middle East, where he’s looking for more oil production and attempting to reassert U.S. influence in one of the world’s most volatile regions. Presidents famously turn their attention to foreign affairs when domestic problems get them down, since it gives them a chance to look statesmanlike while lesser politicians bicker at home. Nobody expects Biden to engineer some kind of breakthrough on Saudi oil production or other challenging issues, but the trip probably won’t hurt Biden and might help him a wee bit.

When Wall Street analysts issue a forecast, they typically include “downside” and “upside” risks that could make things better or worse than predicted. For Biden, there are plenty of downside risks that could bring his presidency even lower. After a couple months’ of relief, inflation could go even higher than it is now. The Federal Reserve could screw up and cause a nasty recession when all it really wants to do by tightening monetary policy is slow the economy. The Russia-Ukraine war is literally a powder keg that could blow up the global economy if something happens that sharply diminishes Russian oil exports or spreads the destruction beyond Ukraine. An extreme case would be the use of nuclear weapons.

The upside risks for Biden include a “soft landing” in which the Fed tames inflation a lot faster than economists expect, without causing a recession. Some type of national unifying event—an unprovoked, 9/11-style terrorist attack is the typical example—could create an unwanted leadership moment, as the Russian invasion has for Ukrainian President Volodymyr Zelenskyy. It’s also possible new vaccines or some other breakthrough could finally phase out COVID, allowing Biden to claim he ended the pandemic. Go ahead, tell me I’m wrong. A year from now, we'll know.

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