Everything's Fine.

Why Is everyone so grumpy?

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This post appeared yesterday at Political News Items. You can subscribe by clicking on this link. The first 14 days are free. You can unsubscribe at any time. Act now while supplies last.

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The headline and the sub-headline above, taken together, puzzle many in the liberal-media-political world, especially those whose job is to convince us that President Biden is a strong candidate for re-election and the Democrat best positioned to defeat Donald Trump (or any other Republican, for that matter).

We’ve avoided recession, unemployment is at record lows, inflation has cooled, Biden has rallied and strengthened NATO following Russia’s invasion of Ukraine, China is on the back foot, we have begun the transition to a more climate-sustainable future, Biden has been steady under pressure, etcetera. So goes the narrative (true or not).

So what’s up with the voters? What’s the matter with them? Why can’t they see things as “we” do?

“What’s the matter with you?” isn’t exactly a winning message, so they might want to work on that. But “messaging” isn’t the problem. The reason so many voters aren’t on board with what might be called “the Biden narrative” is simple: They’ve run out of money.

The first two items in this morning’s News Items tell the tale.

• Americans outside the wealthiest 20% of the country have run out of extra savings and now have less cash on hand than they did when the pandemic began, according to the latest Federal Reserve study of household finances. For the bottom 80% of households by income, bank deposits and other liquid assets were lower in June this year than they were in March 2020, after adjustment for inflation. All income groups have seen their balances decline in real terms from a peak in 2021, according to the Fed survey. But among the wealthiest one-fifth of households, cash savings are still about 8% above their level when Covid hit. By contrast, the poorest two-fifths of Americans have seen an 8% drop in that period. And the next 40% — a group that roughly corresponds with the US middle class — saw their cash savings drop below pre-pandemic levels in the last quarter. The figures point to dwindling firepower available for US consumers, whose resilience has kept the economy growing at a rapid clip this year and staved off the recession that many expected. Some analysts warn a downturn is still in the cards as households run low on spare cash. (Source: bloomberg.com)

• Consumers in the market for loans to buy homes and cars are discovering that, because of the Federal Reserve’s rate increases, their money gets them a lot less than it would have a few years ago. Meanwhile, those with credit cards and other loans that carry rates pegged to broader benchmarks are finding they have gotten much more expensive. Fed officials signaled last week that they plan to keep interest rates high for quite a while. For families who don’t need to borrow, higher rates might not affect daily life too much. But for those who do, the Fed’s aggressive rate increases are really beginning to sting. “The bite is starting now,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. (Source: wsj.com)

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Way back in February, when he was just starting his Substack newsletter, Joe Klein (my future podcast partner) wrote a smart piece (“It’s the Culture, Stupid”) about the importance of cultural issues in American politics. Here’s a lengthy excerpt from that piece:

Deep in the Democratic Party’s DNA is the notion that the economy matters more to voters than cultural issues. Sometimes it does. It certainly did after the crash of 2008. Inflation helped defeat Jimmy Carter in 1980. And then there was 1992, when James Carville wrote his immortal words on the blackboard in Bill Clinton’s Little Rock headquarters: It’s the economy, stupid!

It wasn’t, really. We were emerging from a minor recession, but Clinton’s economic policies weren't what won the election—indeed, he changed them almost immediately after winning office, from stimulus to budget-balancing, palliating the bond market and lowering interest rates (a brilliant choice as it happened). Clinton won the presidency because he convinced voters that, unlike the past 20 years of Democrats, he was tough on crime (including a rather disgusting execution of Ricky Ray Rector, a black man of limited intelligence) and that he wanted to reform welfare (which badly needed it). He also presented himself as a McDonald’s supersizer and regular guy with a Southern accent, who could talk the birds from the trees. He was fortunate in his opponent, George H. W. Bush—a thoroughly decent man and a very good President but an indifferent campaigner who had broken an essential promise (Read my lips: no new taxes) and had been seriously weakened by Pat Buchanan’s rebel campaign, which portrayed him as something of an effete wimp. (The death of Bush’s campaign monster Lee Atwater, who had made culture a centerpiece of the 1988 campaign—remember the black murderer, Willie Horton?—debilitated his ability to ding Clinton.)

It was culture that mattered in 1992: Bubba beat the elite. It will be culture that matters in 2024. And if you don’t believe me, check out the reception that Nikki Haley has received since announcing she’s running for president. It’s been all about race and gender.

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I agree with Joe that culture will play a major role in the 2024 presidential campaign. The abortion issue, for instance, will be a big part of every Democratic campaign for federal, state and local office. Immigration will be a big part of every GOP campaign for federal, state and local office. Both are “cultural issues.” They are not “economic issues”, per se.

That said, they “take place” in an economic environment. And if no one has any money, except for the top 20%, the economic environment is going to be hostile territory for the president’s re-election campaign. “Cultural issues” are going to tap into a deeper pool of resentment.

Here’s the over-riding question: If 80% of the electorate is tapped out now, what will they be doing about it six or twelve months from now? They have two options: Either cut spending to make ends meet or lay on more debt to keep pace with their expenses. Either way, it’s not the way it used to be, when interest rates were very low, there was money in the bank and going out to dinner didn’t cause mini-panic attacks (will my credit card work?).

The economic environment for most Americans is challenging. Everything is not fine. A storm is coming.