The Biden scorecard

Episode Summary

Executive Summary: The episode assesses Joe Biden’s economy as a balance sheet: liabilities include inflation-eroded real wages, volatile and elevated gas/utility costs, unaffordable housing for non-owners, and weaker stock-bond returns; assets include a very strong labor market, resilient consumer spending, rising household wealth, and gains for current homeowners. The hosts conclude the economy is slightly net positive on the data, but volatility and lived experience may still weigh on voters.

Main Topics: Real wages and inflation (Priority: 5/5): The hosts argue wages and prices have both risen roughly 15-20%, leaving households roughly even in aggregate but feeling worse because price increases are experienced as losses. Inflation’s persistence makes the economy feel negative despite nominal income gains. Gas and utility costs (Priority: 4/5): Gasoline and electricity bills are highlighted as highly visible, volatile expenses that shape public perceptions of the economy and create anxiety, even though they are not solely attributable to Biden. Housing affordability and mortgage lock-in (Priority: 5/5): Housing is presented as a major liability for renters and would-be buyers because mortgage rates around 7% and high prices have locked many people out, while cheap existing mortgages freeze supply and keep prices elevated. Market performance and portfolio returns (Priority: 4/5): The show notes weaker stock and bond returns after a long stretch of unusually strong gains, suggesting mean reversion rather than presidential control, though inflation and rising rates hurt bond performance especially. Employment strength (Priority: 5/5): The strongest asset is the labor market: payrolls remain strong, unemployment pressure is low, and many workers—especially lower-paid workers—have gained better jobs and higher pay in real and nominal terms. Consumer spending and household wealth (Priority: 4/5): Strong consumption has repeatedly thwarted recession calls, supported by job growth and rising household wealth. The bottom half of the wealth distribution has seen meaningful gains in housing, vehicles, and retirement assets. Political implications and volatility (Priority: 4/5): Even if the economy is slightly positive on balance, the hosts suggest volatility and the roller-coaster experience may hurt Biden politically. They also note that election outcomes may hinge on a small number of swing voters in key states.

Key Arguments: Wages and prices have both risen roughly 15-20%, but the economy is not neutral because people feel losses more intensely than gains. Gasoline and utility prices are especially salient because they are visible, frequent, and volatile, so Biden receives blame even when broader forces are involved. Housing is a major structural liability: high rates, high prices, and too little homebuilding have locked many Americans out of ownership. Stock and bond weakness is partly mean reversion after an unusually strong period, but inflation and rapid rate hikes made the environment worse. The labor market is the clearest success: strong payroll growth, broad employment, and improved outcomes for lower-end workers support Biden’s case. Strong consumer spending has prevented recession and reflects both jobs and improved household balance sheets. Wealth gains have not been evenly distributed, but lower-half households have benefited through housing, durable goods, and retirement accounts. Politically, a data-driven “slightly positive” economy may still poll badly if voters focus on volatility and everyday costs rather than aggregate indicators.

Data Points: Time until U.S. election: 13 months away - The discussion frames the economy as a major issue heading into the election. Price increase since Biden took office: 15-20% - The hosts estimate the rise in prices over the Biden presidency. Income/wage increase since Biden took office: 15-20% - Nominal wages and incomes roughly matched inflation over the period. Gas prices vs. inauguration: 60-70% higher - Gasoline costs are described as substantially above the level when Biden was inaugurated. Mortgage rates: 7% - Current rates are cited as a reason housing is unaffordable for many would-be buyers. National rent-to-income ratio: 30% - Used to argue the U.S. is effectively a rent-burdened country. Stock-and-bond portfolio norm: 70% stocks / 30% bonds - The hosts reference a typical retiree portfolio mix when discussing market performance. Historical return normalization: 14% a year to less than 7% a year - Rob describes mean reversion after an unusually strong period for assets. Rate increase: More than 5 percentage points - Inflation forced rates up rapidly, hurting bond returns. Swing-state focus: 35 people in Wisconsin, Arizona, and Pennsylvania - The hosts speculate the election may hinge on a very small group of voters in key states.

Pivotal Quotes: "the economy is a little net positive, maybe slightly, you know, small net positive" — Ethan Wu: Overall judgment after weighing liabilities and assets "people are loss averse, meaning losing something hurts them more than gaining something helps them" — Robert Armstrong: Explaining why equal wage and price gains still feel negative to voters "America is a rent-burdened country." — Robert Armstrong: Summarizing the housing affordability problem for renters and prospective buyers

Implications: The transcript suggests Biden can credibly claim a strong labor market and resilient consumer economy, but voter sentiment may still be dragged down by inflation memories, housing pain, and volatility. The political payoff of good macro data may be limited if everyday costs dominate perceptions.