Higher wages, higher growth, higher productivity. Win win win.

There’s a chance we could go exactly that way, and yet Americans don’t seem too enthusiastic.

Because they really hate inflation.

For the coalition that has supported this agenda (Democrats to the left of Larry Summers, along with economists representing a variety of ideologies), the economy today is a political success story that has been more than a decade in the making. And the fact that it has not yet translated into political success is a worrying challenge for them and for President Joe Biden.

Instead of enjoying a victory lap, the people who oversaw this recovery – in the administration, the Federal Reserve, Congress, and academia and economic think tanks – are being asked to explain the disconnect between economic data and the polls.

“There is a lot of fear and introspection among the architects of these efforts that people don’t necessarily buy what we sell,” one prominent advocate of progressive policies told me. “And people are also under some pressure about it.”

“What are we doing here if we’re not building an economy that people like?”

When the coronavirus pandemic hit, officials were determined not to repeat the slow recovery after the 2008 financial crisis. Congress – first on a bipartisan basis, then along partisan lines – went to great lengths to keep people afloat and then made long-term investments in infrastructure and green energy.

Employment recovered quickly from the Covid recession and unemployment has been below 4 per cent for two years. We saw similar numbers during former President Donald Trump’s administration, but it took nine years of economic expansion to get to that point after the last recession. (And before that, the last time unemployment fell this low was in the 1960s.)

The Federal Reserve could also accomplish an almost unheard of feat: reducing inflation without pushing the United States into recession, as economic resilience has allowed the economy to withstand aggressive interest rate increases.

These dynamics are at the center of every article you read about why consumer confidence isn’t higher or why people don’t recognize that this is a good economy.

Privately, some administration officials worry that not only re-election is at stake, but also that policymakers may not be as forceful when the next recession hits, for fear of fueling prices. This occurs even as officials have become more confident that their approach was the right one.

“There is a lot of concern that we are learning too much of the fiscal and monetary policy lessons of this recession,” one official told me.

And Americans’ skepticism about the economy is reasonable. Rent and grocery prices have risen about 20 percent in the past three years. Electricity has increased more than 25 percent. While wage increases have outpaced cost increases over the past year and a half, they still fall short over the course of Biden’s presidency. And the lack of affordable housing in particular is shaping up to be a painful reality for millions of Americans, something the White House has acknowledged.

“I don’t think the story here is that the economy is perfect,” Rep. Andy Barr (R-Ky.) told me. “The excessive spending created by the inflation crisis has raised prices for the American people and the cost of credit is historically high.”

So, although inflation has cooled noticeably, “the toothpaste is no longer in the tube.”

Still, economic sentiment surveys show that optimism has been rising and may continue to do so. So, as the November election approaches, the Biden administration and its allies hope that people will get used to the new higher price levels and that positive economic trends, such as wages growing faster than prices, last long enough to win over voters.

The conversation inevitably dovetails with shaky debates about how much blame different factors should have for causing inflation: government spending, messy supply chains, oil market disruptions from Russia’s war in Ukraine, general weirdness as the economy reopens due to Covid.

Democrats were willing to tolerate some inflation when they passed the American Rescue Plan in 2021, perhaps underestimating or forgetting how much people hate rising prices, but they also argue that this particular fight was mainly caused by production delays. and shipping, as well as unpredictable changes. What people spent money on.

The administration has also blamed companies for seizing the moment. White House economic adviser Lael Brainard told reporters Thursday that consumer brands and grocery chains need to lower their prices from pandemic-era levels.

Then there are those close to the White House who question the basic premise of all this political angst.

Bharat Ramamurti, who served as a senior economic adviser in the White House until September, strongly disagreed that consumer confidence should be taken as a referendum on Biden’s economic policies. He pointed to polls showing that Republicans say they feel worse about the economy than Democrats, which he attributed to inevitable partisanship. (He was by no means the only person to raise this point.) He also said that the popularity of leaders around the world has been affected by high inflation.

Ramamurti firmly believes that the Biden administration—and the progressive economic agenda in general—deserves considerable bragging rights and flatly rejected my assessment.

“In the United States, the fact that we took a more aggressive approach that led to a faster recovery … has put the president in a much stronger position than many people internationally,” he said. “The idea that, ‘Oh, the Democrats instituted a set of policies that they always wanted and that ended up producing an extraordinarily fast and highly equitable recovery, and that’s why people are unhappy,’ I don’t think is a good read of the evidence. .”

If the government hadn’t done the same with checks, expanding the child tax credit and more, he said, “we still would have had historically high inflation and everyone would be even more miserable.”

One of the people who has worked longest to advance this progressive vision of economics is Dean Baker, an economist who co-founded the Center for Economic and Policy Research. When I spoke to him this week, I had his own frustration: that the left doesn’t treat a victory as a victory.

“There’s a lot of resistance because people say, ‘We should keep pushing.’ I’m fine with that,” she said. “But if you don’t recognize when you’ve made progress, you’ll never get anywhere.”

By Sam