President Joe Biden is facing a pandemic challenge he never anticipated: an economy that is much stronger than forecast.
Biden ran against Trump in part on the idea that the White House’s alleged mishandling of the pandemic had unnecessarily damaged the U.S. economy. He took office predicting the months ahead would be a “dark winter” and successfully pushed for $1.9 trillion of emergency spending to ward off a second downturn.
Now Biden and Vice President Kamala Harris are setting out on a nationwide tour to tout the spending package. The challenge they face is that the economy is recovering too quickly for them to be able to credibly claims credit for the expansion later.
The economy was outperforming expectations even before Biden took office. Indeed, a misunderstanding about how the U.S. calculates economic growth and how most of the rest of the world does led some Democrats—including Biden himself—and mainstream media broadcasters to claim, falsely, that the U.S. economy was weaker than Europe’s. In fact, it was stronger. GDP fell by 6.8 percent in the Eurozone last year and just 3.5 percent in the U.S.
In the final quarter of 2020, the difference was even more pronounced. The Eurzone’s economy contracted for the fourth consecutive quarter while the U.S. economy expanded at an annualized rate of 4.1 percent, the second consecutive quarterly expansion.
So far this year, the economy’s performance and outlook have improved significantly. Job gains accelerated in February and the weakness initially reported in January was revised away. Retail sales have outperformed expectations, boosted in part by the $600 relief payments authorized by the Trump administration. The housing market is booming, enriching homeowners and creating jobs. Manufacturing activity is accelerating. The stock market is at record highs.
There are many reasons for the outperformance. The Fed has successfully convinced markets that it will hold rates down even if the economy recovers more quickly than expected. The Trump administration’s policies left states room to experiment with the level of restrictions placed on businesses. Despite bitter partisan divides, Congress and the White House enacted billions of dollars of relief last year. And, perhaps most importantly, the U.S. consumer never really retreated into a protective crouch that can exacerbate economic downturns.
Whatever the cause, it complicates the narrative that the Biden administration wants to sell to the country now and when the midterm elections come around next year. It’s tough to convince the public that you rode to the rescue of an economy that has been growing at a rapid pace six months before you took office. But that is what Biden and Harris are going to attempt in the coming weeks.