Tom with the BTRTN November 2021 Month in Review.
Joe Biden is indeed realizing his dream, however awkwardly stated, of rebuilding America “back better.” His trio of legislative blockbusters -- the already-passed (last March) American Rescue Plan, newly-passed Infrastructure Investment and Jobs Act (a.k.a., the “hard” infrastructure bill), and the almost-inevitably-destined-to-be-passed (at some point, in our view) “soft” infrastructure bill -- will collectively total nearly $5 trillion in spending that will reshape America for decades to come. Almost every sector of the U.S. economy will be fundamentally altered by the bills, and, indeed, almost every American will be touched by them in some way. Many Americans may not understand as yet how their lives will be bettered by these epic new bills, but someday, they will, even if some will still listen when future GOP pols scream to reverse them.
The problem for Biden is this -- the future is not now. And “now” is kind of a mess. The key question for the Biden administration is, how quickly can we get to the future?
state of the country is currently a “mess” through little fault of the Biden
administration. The twin evils that have
been tormenting Biden (and America) this month are the interrelated issues of
inflation and COVID. Inflation is now
running at 6.2%, the highest level of the 21st century, and well above the
less-than-2% level of the last seven years or so.
inflation spike has been driven by three primary factors, and the root cause of
each is COVID. The first is strong
consumer demand, as Americans have begun to spend that which they saved in 2020
at the onset of COVID. This unleashing
of demand has triggered a burden on supply chains, the second factor, which has
been exacerbated by the third, a labor shortage. Any economist will tell you that when demand
exceeds supply, prices will rise, and that is exactly what has happened. The food and energy sectors have been
particularly hard hit, so the American consumer is feeling the pain in very
direct, identifiable ways, every time they go for groceries and to fill up the
has not caused inflation is Biden’s
$1.9 trillion American Rescue Plan, the first bill which passed, as noted, in
March, 2021. The GOP is working hard to
link that spending infusion with inflation to score political points against
Biden, but a recent study by the San Francisco Federal Reserve has determined
that only 0.3 percentage points of the roughly 4-point increase in 2021 can be
attributed to that bill. They further
estimate the bill will have a 0.2 percentage point impact in 2022 and none at all in
2023. Meanwhile, much rescuing has been done, with a material impact on reducing child poverty being just one example.
inflation is a very tough issue for presidents to shake. There is little they can do to combat it, apart
from symbolic acts. Biden has called for
an investigation into price gouging and released 50 million barrels of oil from
the Strategic Petroleum Reserve to fight the rise in gasoline prices. But many economists believe that once we get
through the holiday demand cycle (and China takes a break with its New Year in
early February), inflation will ease back to the 2% range, that is, by spring
of 2022 (or summer, according to Janet Yellin).
from inflation, the economy is quite sound (see our “Bidenometer” measure
below). Unemployment has fallen to 4.2%,
consumer spending, as noted, is strong. GDP
growth, at 2%, has returned to pre=pandemic levels, and is forecast by The
Conference Board to grow at 4% in 2022.
The Dow hit an all-time high in early November, well after the inflation
news became baked in, and consumer confidence remains solid. The National Retail Federation’s current
report summarizes the consumer outlook heading into the holiday season as
are several factors coming together to have a major impact on the holiday
outlook, but strong household fundamentals are a bright spot in the uncertain
present. Consumers are in a very favorable position going into the last months
of the year and are spending because they can. A savings buffer of roughly $2.5
trillion accumulated during the pandemic has supercharged consumer spending
this year while income is growing in the form of more jobs, more hours and
higher wages reflecting businesses’ competition for workers. Household wealth
has risen strongly and set another record high in the second quarter (the
latest data available). As wealth accumulates, consumer confidence increases
and triggers consumer spending. Confidence also makes consumers comfortable
using credit, and easily available credit could provide additional liquidity
for spending this holiday season.
COVID story, as always, is more complex.
After a sharp decline nationally in new cases from September to October
(from 3.6 million to 2.2 million), they rose slightly (by 4%) in November. This was a surprise to the CDC modelers, who
forecast another decline prior to the Thanksgiving holiday. The uptick is concerning. Deaths declined again, however, by 30%, from 48,000
in October to 34,000 in November, a still horrific level.
main problem is that vaccinations have slowed to a crawl in November. Fewer than 4 million Americans were fully
vaccinated in November, even less than the anemic 6 million in October, and the
total of fully vaccinated Americans climbed from 192 million to 196 million,
which marks an increase in the vaccination rate of a single percentage point,
from 58% to 59%.
overall vaccinations have just about peaked, the evidence has become clear that
vaccine effectiveness wanes over time.
Given that fact, it is a reasonable to question whether the 59% figure
is a valid representation of how many Americans are truly vaccinated. We are
actually experiencing the next crisis – vastly underplayed in the media – that is,
the slow take-up rate of the booster shot, which restores virus protection to
the level of the original vaccination. Only 41 million Americans have received
the booster, meaning a stunning 155 million fully vaccinated Americans are
steadily losing their protection. Booster
vaccinations are occurring at a rate of about 5-6 million per week, which
means, even if this rate continues, it will take 7 months to boost everyone who
was originally vaccinated. This, of
course, must be contributing to the ever-increasing number of “breakthrough”
despite all this, the Biden Administration might have believed that come the spring,
as with inflation, COVID might be under some degree of control. COVID will likely never end, but there could
come a point when the pandemic is over, and COVID becomes “endemic” – something
we can learn to live with while conducting normal lives, exercising a few
common sense precautions, such as (perhaps) annual shots and limited masking.
that end, Biden took steps within his power.
His boldest move, requiring vaccinations by employees of any company
with 100 employees or more, has now been held up by a federal judge, and
doubtless will be settled in the Supreme Court at some point down the
road. The CDC, albeit far too slowly,
continued to amp up the need for boosters, finally getting to the point of
recommending that “all adults should” get the booster.
then came the November 25th breaking news of the new Omicron variant, first
identified in South Africa, spoiling U.S. Thanksgiving celebrations and rocking
the entire world. Omicron was identified
as a “variant of concern” by the WHO and within a few days had been identified
in over 20 countries, including the US.
Much remains unknown about the variant, including its speed of transmissibility,
the degree of illness it inflicts, and whether or not current vaccines offer
protection. But the variant was of
sufficient character that there is concern that it might be on the more dangerous
side of all three of those variables.
The WHO and the CDC need a few weeks to sort all that out, and who knows
where that will leave us for 2022. One
bright note was that the vaccine makers seemed to indicate that, if required,
new vaccines to counter Omicron could be created quickly – if we can get people
to take it, clearly an increasingly difficult proposition.
did score two successive legislative triumphs this month in his visionary quest
to rebuild the country. The first was
the “hard” infrastructure bill, which Biden signed into law, a rare bi-partisan
victory, the first in ages that did not represent an “emergency” measure of one
kind or another. The law bill promises
$1.2 trillion in spending on roads, bridges, highways, water and broadband over
a five year period. This bill has an
actual chance to begin to make a difference in 2022 as the hiring for these
massive projects begins.
second was that the “soft” infrastructure bill, featuring deep investments in
climate change and human services, achieved a significant milestone when the
House passed it along party lines (save one “nay” vote from Maine Democrat Jared
Golden). This was momentous because it
represented another singular achievement by Nancy Pelosi in unifying her party’s
recalcitrant progressive and moderate wings, both of which defied her at times
along the way, with very little margin for error (Golden fell within it).
soft bill now moves to the Senate, where Chuck Schumer has set up an aggressive
timetable, targeting a pre-Christmas passage.
This is daunting because the Senate also has to consider separate
legislation on government funding (since cleared, avoiding a GOP-threatened government
shutdown), the National Defense Authorization Act and the debt ceiling. Schumer not only has to continue to contend
with the still unsatisfied Joe Manchin and Kristen Sinema, who continue to have
issues with the House soft infrastructure bill, and also with Schumer’s accelerated
timetable, each believing the bill would be better served with negotiations
extending after the New Year.
Biden Administration also has to figure out a way to sell the benefits of each
package to the American people, who generally favor the programs in surveys,
but seem to know more about (and react to) the price tag. It did not help when the House passage of the
soft bill was upstaged in the media by the verdict in the Kyle Rittenhouse
murder trial (he was acquitted) on the same day. One can imagine the White House seething as
CNN devoted a full 25 minutes to the verdict, nearly pushing Biden and Pelosi’s
triumph into the second half-hour of the “The Situation Room.”
other ongoing drama of the month is the suddenly empowered House committee
investigating the January 6 insurrection, which achieved a victory when a grand
jury indicted Steve Bannon on contempt of Congress charges. That prompted Trump’s former Chief of Staff
Mark Meadows, who had defied the committee on the grounds of executive
privilege, to return to a more cooperative mode, though his true level of
cooperation remains to be seen. The
committee unleashed a torrent of new subpoenas, dozens of them, covering event
organizers, Trump’s inner circle and other White House officials, and gadflies
such as Roger Stone and Alex Jones.
for Biden, it is ironic that our oldest president is banking on a brighter future,
playing the only game at his disposal, the long game. There
will be tough sledding for the next six months, as inflation, Omicron and the
bills sort themselves out.
The madness department for the month revealed an array of
stunning acts from Trump and his zealots.
Meadows has written a book that reveals that Trump tested
positive for COVID days before the debate with Joe Biden. He subsequently tested negative, and Trump
essentially ignored the first test. He
never notified the Biden camp, nor the Gold Star families he met with, nor the
other staffers that surrounded him. This is a sick man.
In Trump’s comments in the aftermath of Colin Powell’s death,
which were not flattering to the deceased, he also opined on the removal of a statue
of Thomas Jefferson from a building in New York City, extolling Jefferson as a “principal
writer of the Constitution of the United States.” Jefferson had nothing to do with that
document, since he was in Paris serving as Ambassador to France at the
time. Jefferson was the principal
architect, of course, of the Declaration of Independence.
Then there were the antics of GOP House crazies Paul Gosar (who
issued a Twitter cartoon showing him killing Alexandria Ocasio-Cortez) and
Lauren Boebert (who implied Ilhan Omar Ilhan is a terrorist), which were insane and
worthy of House censure (which Gosar received) and committee stripping. We have indeed reached The Land of Perverse
Incentives, when coverage of such untoward behavior is used by the perpetrators
to raise money, with great success.
The most interesting part of this insanity is the bind it
continually puts GOP House Majority Leader Kevin McCarthy in, in his naked, near-pathetic
quest to become Speaker if the GOP, as expected, takes the House in
2022. Marjorie Taylor Greene and her
band of a dozen or so crazies (including Gosar and Boebert) effectively control
his fate. But so do GOP moderates if
they band together, flex their muscles, and tell McCarthy he needs to control
the crazies if he expects their support.
BIDEN APPROVAL RATING
Joe Biden’s approval rating remained at 45%, with a -4% “net,” for the third consecutive month. This remains Biden’s low water mark for his presidency. As the thrust of this article points out, there are few catalysts to improve the score in the near-term, but at least some cause for optimism for 2022 with the potential for an easing of inflation, the passage of the “soft” bill and the initial impact of the “hard” bill – all this contingent on the containment of Omicron and a spring diminishment of COVID.
HOW BIDEN IS HANDLING KEY ISSUES
While his approval rating
held, Biden continues to lose ground in the assessments on how he is managing
various key issues. With the onset of
inflation and the failure of COVID to subside, the perception of Biden’s
management of the economy has taken a particular beating in the last several
months, and is now well below Trump’s like score at the end of his
presidency. The same is true for Biden’s
handling of foreign policy, for other reasons (notably involving the Afghanistan
exit and the France diplomatic snafu).
On other measures, notably COVID management and whether the nation is on
the “right track,” Biden’s scores have fallen but remain well ahead of Trump’s.
We re-introduce tracking of the
generic ballot with a year to go until the midterms. The ballot measures voting sentiment for
either the Democratic or Republican representative on a “generic” (unnamed)
basis, and is highly predictive of actual House of Representative election
outcomes at a macro level.
Based on 13 polls in November,
on average the GOP leads the Democrats on the generic ballot by one point. Using BTRTN’s proprietary models, if this
lead was still in place on Election Day in 2022, the GOP would pick up about 20
seats and take over the House with some room to spare.
The “Bidenometer” held at October levels in November,
remaining at +38. For all the momentous
news of the month – including the COVID uptick and the passage of the “hard”
bill – the measures changed very little, with the drop in the unemployment rate
offsetting minor drops in the Dow and consumer confidence.
As a reminder, this measure is designed to provide an
objective answer to the legendary economically-driven question at the heart of
the 1980 Reagan campaign: “Are you
better off than you were four years ago?”
We reset the Bidenometer at this Inaugural to zero, so that we better
demonstrate whether the economy performs better (a positive number) or worse (a
negative number) under Biden than what he inherited from the Trump
Bidenometer of +38, the economy is clearly performing much better under Biden compared
to its condition when Trump left office.
This exclusive BTRTN measure is comprised of five
indicative data points: the unemployment
rate, Consumer Confidence, the price of gasoline, the Dow-Jones Industrial
Average and the U.S. GDP. The measure is
calculated by averaging the percentage change in each measure from the
inaugural to the present time.
Using January 20, 2021 as a baseline measure of zero, you
can see from the chart below that under Clinton the measure ended at +55. It declined from +55 to only +8 under Bush,
who presided over the Great Recession at the end of his term, then rose from +8
to +33 under Obama’s recovery. Under
Trump, it fell again, from +33 to 0, driven by the shock of COVID-19 and
Trump’s mismanagement of it. Now we have
seen it move upward to +38 under Biden.
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BTRTN calculates our
monthly approval ratings using an average of the four pollsters who conduct
daily or weekly approval rating polls: Gallup Rasmussen, Reuters/Ipsos and You
Gov/Economist. This provides consistent and accurate trending information and
does not muddy the waters by including infrequent pollsters. The outcome tends to mirror the RCP average
but, we believe, our method gives more precise trending.
the generic ballot (which is not polled in this post-election time period), we
take an average of the only two pollsters who conduct weekly generic ballot
and You Gov/Economist, again for trending consistency.
The Bidenometer aggregates a set of
economic indicators and compares the resulting index to that same set of
aggregated indicators at the time of the Biden Inaugural on January 20, 2021,
on an average percentage change basis. The basic idea is to demonstrate whether
the country is better off economically now versus when Trump took office. The indicators are the unemployment rate, the Dow-Jones
Industrial Average, the Consumer Confidence Index, the price of gasoline and