On Oct. 26, the Department of Commerce announced that gross domestic product had grown at an annual rate of 4.9 percent in the third quarter. This growth rate ran well above even optimistic forecasts, leading to what can only be called triumphalism from a White House dead-set on making “Bidenomics” a key to its 2024 presidential campaign. President Biden issued a self-congratulatory statement, the White House echoed it over and over — and Donald Trump’s relative popularity increased.
As the White House touted U.S. prosperity, a New York Times-Siena College poll found that 59 percent of voters in six key swing states have more confidence in Donald Trump’s ability to manage the economy over Joe Biden’s, regardless of whom they think they’ll vote for. Zero — yes, zero — respondents under 30 in three of the swing states think of the economy as “excellent.”
The West Wing may believe Bidenomics is working because the macroeconomic gurus at the Federal Reserve are telling the White House it’s working. But Bidenomics has failed to create sufficient tangible improvement in the lives of most voters in a world in which groceries still cost more than they did a year ago, average rent and mortgage rates have spiked, and health and child care grow ever more unaffordable. Biden cannot win in 2024 unless he speaks to the economy as it is, not as he wishes it were.
Bidenomics’ mortal enemy isn’t Donald Trump — it’s a reliance on aggregate and average numbers that masks the nature of the economy Americans experience. Focusing on G.D.P. is a mistake, as it obscures the range of financial success and hardship in an economy as unequal as that of the United States.
Although the Fed’s most recent Survey of Consumer Finances showed that wealth inequality has dipped a bit because of recent, generous fiscal spending, income inequality is worse than ever. For most Americans, a sense of financial well-being doesn’t come from capital returns in the stock market or even from house price appreciation. It comes in each paycheck and benefit payment, and is challenged by each bill and receipt from the supermarket. Paychecks are falling shorter and shorter for more and more households, no matter the seemingly record employment data the White House also likes to tout.
In a nation this unequal, the income generated by a growing G.D.P. is so unevenly shared that the impression of widespread prosperity falls apart. The most recent U.S. data show that the top 5 percent of households by income received 23.5 percent of aggregate household income in 2022, and the top 20 percent got over half. In sharp contrast, the bottom 40 percent received 11.2 percent, a scant return for all their hard work.
G.D.P. may look robust, but 64 percent of households live paycheck to paycheck from time to time, according to a March consumer survey. These families are barely making it through the week, let alone accumulating the wealth essential for financial resilience and, over time, financial security. More middle-class households are worried about the economy now than they were a year ago, with 57 percent saying in a Harris Poll that higher borrowing costs are particularly problematic.
President Biden ignores the inequality at the heart of Bidenomics at his own political peril. America’s top 1 percent always got far more than 1 percent of national income and wealth, but they have rarely gotten as much as they do now. The most recent data show that the top 1 percent now owns 31.4 percent of American wealth, more than that of the entire bottom 90 percent. Between 1975 and 2018, American adults at the median income saw their paychecks go up at less than one-third the rate of G.D.P. growth, while those with incomes at the 99th percentile grew their earnings nearly twice as fast as G.D.P. climbed.
Of course, economic inequality was on the rise long before Mr. Biden walked into the Oval Office. What’s different now is not only that inequality is more deeply entrenched, but also that Americans are less inclined to hope that, even as they fall behind, they and their children will soon catch up. A nation as fractious as the United States in 2023 is not inclined to be generous to promises that belie what voters feel as they try to balance their household budgets.
The percentage of Americans who told the Federal Reserve they were worse off in 2022 than the previous year increased by 75 percent — to the highest level since the Fed started asking the question in 2014. Americans with at least a college degree also saw their financial well-being decline the most since the first time the Federal Reserve asked. These are critical voters for the Democratic Party, as are voters between the ages of 35 and 44, who reported a large spike in within-group income equality.
These economic survey results align far better with voter sentiment as seen in the polls than with the data that Mr. Biden deploys to persuade them of their supposedly growing prosperity. Listening to advisers — not voters — is a fatal campaign error, one that Hillary Clinton made in 2016. Joe Biden only narrowly pulled out a win in 2020 because Mr. Trump wasn’t listening to voters when it came to Covid. Now, they’re tuned in to Mr. Trump’s perspective on the economy because Mr. Trump is, in his way, listening to them.
On Nov. 9, the Biden administration’s Office of Management and Budget issued a rule instructing federal agencies in no uncertain terms to consider the impact of the standards they promulgate on economic inequality. Mr. Biden’s political advisers should do the same over the coming year, recasting Bidenomics to truly support the middle class instead of continuing to stand proudly atop an economy where growth goes to those who already have a lot, not those who work hard yet still are in need.
Graphics by Sara Chodosh.
Ms. Petrou is the managing partner of Federal Financial Analytics and the author of “Engine of Inequality: The Fed and the Future of Wealth in America.”
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