The Cost-of-Living Crisis Explains Everything

The Biden administration passed $3 trillion of legislation aimed at revitalizing the American economy and fostering green, equitable, “middle-out” growth. It sent checks to voters, canceled student-loan debt, made direct deposits to parents, showered the country in tax credits, and financed the construction of roads, transmission lines, and bridges. Kamala Harris ran as Joe Biden’s successor in the midst of what some financial analysts described as the greatest economy ever, characterized by strong wage growth, low unemployment, falling inequality, and world-beating GDP.

Harris’s loss has spurred finger-pointing, soul-searching, and garment-rending. For years, thinkers on the left had urged the White House to not just talk about popular issues but also deliver on them—a concept referred to by wonks as deliverism. The Biden-Harris team embraced the idea, and many staffers believed they’d delivered.

Deliverism is just a long word for one of the most basic tenets of electoral politics, buttressed by decades of studies as well as by common sense: Make voters richer, win more of them. Why, if Biden did that, did the Democrats lose?

[Josh Barro: Democrats deserved to lose.]

“When the economy does well for most households, and when programs help create security and opportunity for more people to participate in that economy, political rewards follow,” Mark Schmitt of New America wrote the week before the election, when polls showed the contest as close but likely lost for the liberal side. “What I’m looking for in the 2024 election is some indication of whether this feedback loop still works at all, and if not, whether we can ever hope to recreate some connection” between policy and politics.

Democrats may be tempted now to answer in the negative. But there is a strong case to be made that the 2024 election demonstrates that the feedback loop between policy choices and electoral outcomes does in fact endure—even if it is weakening and weirding. The issue is not that deliverism failed. It is that Democrats convinced themselves that they had delivered, without listening to the voters telling them they had not.

If you look at the headline economic statistics, Donald Trump’s broad-based and definitive win makes little sense. The jobless rate has been below 4.5 percent for three years. The inflation rate has been subdued for more than a year. Real wages—meaning wages adjusted for inflation—are climbing for all workers, and particularly the lowest-income workers. Inequality is easing. The stock market is on fire. Productivity is strong, and start-ups are booming. The United States’ GDP growth rate is double that of the European Union.

The Biden administration helped create that economy. With a narrow legislative window, the administration nevertheless passed a gigantic COVID stimulus bill, the American Rescue Plan. It sent $1,400 checks to millions of families, provided thousands of dollars to parents to defray child-care costs, and shored up local-government coffers.

Then it passed a trio of heavy-infrastructure bills aimed at reshoring the semiconductor industry, transitioning businesses and homes to green energy, and fixing up transportation infrastructure across the country. Biden staffers talked about the trio as a kind of New Deal Lite. Folks might “one day come to remember this as the Big Deal,” Pete Buttigieg, the transportation secretary and eternal political hopeful, told The New Yorker this past summer. “Its bigness is the defining factor.”

Yet one could select other defining factors, among them the infrastructure bills’ lack of easy-to-grasp deliverables. I cover economic policy. I would be hard-pressed to explain what constitutes the Big Deal without putting someone to sleep; when I summarize the legislation, I often say “green-energy stuff.” Moreover, many of those deliverables were not instantaneous; today, it is hard, though certainly not impossible, to point to projects that Bidenomics built. “Much of the work we’ve done is already being felt by the American people, but the vast majority of it will be felt over the next ten years,” Biden said on X last week.

The much bigger issue has to do with the Biden-Harris administration’s social policies and the economy it fostered. To be clear, the headline economic numbers are strong. The gains are real. The reduction in inequality is tremendous, the pickup in wage growth astonishing, particularly if you anchor your expectations to the Barack Obama years, as many Biden staffers do.

But headline economic figures have become less and less of a useful guide to how actual families are doing—something repeatedly noted by Democrats during the Obama recovery and the Trump years. Inequality may be declining, but it still skews GDP and income figures, with most gains going to the few, not the many. The obscene cost of health care saps family incomes and government coffers without making anyone feel healthier or wealthier.

During the Biden-Harris years, more granular data pointed to considerable strain. Real median household income fell relative to its pre-COVID peak. The poverty rate ticked up, as did the jobless rate. The number of Americans spending more than 30 percent of their income on rent climbed. The delinquency rate on credit cards surged, as did the share of families struggling to afford enough nutritious food, as did the rate of homelessness.

Government transfers buoyed families early in the Biden administration. But they contributed to inflation, and much of the money went away in the second half of Biden’s term. The food-stamp boost, the extended child tax credit, the big unemployment-insurance payments—each expired. And the White House never passed the permanent care-economy measures it had considered.

Interest rates were a problem too. The mortgage rate more than doubled during the Biden-Harris years, making credit-card balances, car payments, and homes unaffordable. A family purchasing a $400,000 apartment with 20 percent down would pay roughly $2,500 a month today versus $1,800 three years ago.

Indeed, the biggest problem, one that voters talked about at any given opportunity, was the unaffordability of American life. The giant run-up in inflation during the Biden administration made everything feel expensive, and the sudden jump in the cost of small-ticket, common purchases (such as fast food and groceries) highlighted how bad the country’s long-standing large-ticket, sticky costs (health care, child care, and housing) had gotten. The cost-of-living crisis became the defining issue of the campaign, and one where the incumbent Democrats’ messaging felt false and weak.

Rather than acknowledging the pain and the trade-offs and the complexity—and rather than running a candidate who could have criticized Biden’s economic plans—Democrats dissembled. They noted that inflation was a global phenomenon, as if that mattered to moms in Ohio and machinists in the Central Valley. They pushed the headline numbers. They insisted that working-class voters were better off, and ran on the threat Trump posed to democracy and rights. But were working-class voters really better off? Why wasn’t anyone listening when they said they weren’t?

A better economy might not have delivered the gains that Democrats once could have relied on. Voters do seem to be less likely to vote in their economic self-interest these days, and more likely to vote for a culturally compelling candidate. As my colleague Rogé Karma notes, lower-income white voters are flipping from the Democratic Party to the Republican Party on the basis of identitarian issues. The sharp movement of union voters to Trump seems to confirm the trend. At the same time, high-income voters are becoming bluer in order to vote their cosmopolitan values.

But I would not assume that we are in a post-material world just yet. “You got to tell people in plain, simple, straightforward language what it is you’re doing to help,” Biden said after passing his sweeping COVID rescue bill. “You have to be able to tell a story, tell the story of what you’re about to do and why it matters, because it’s going to make a difference in the lives of millions of people and in very concrete, specific ways.”

The Biden-Harris administration did make a difference in concrete, specific ways: It failed to address the cost-of-living catastrophe and had little to show for its infrastructure laws, even if it found a lot to talk about. And it dismissed voters who said they hated the pain they felt every time they had to open their wallet.

No wonder voters decided to see what Donald Trump might deliver.