By David Lawder
CHICAGO (Reuters) – U.S. Treasury Secretary Janet Yellen on Thursday drew a stark contrast between President Joe Biden’s economic policies and those of former President Donald Trump, arguing that Biden’s approach has produced the “fairest recovery on record” and will reap more benefits for the middle class.
Two days after Trump tightened his grip on the Republican 2024 presidential nomination with a comfortable victory in the New Hampshire nominating contest, Yellen traveled to Chicago to try to turn the tide on low voter approval ratings for Biden’s handling of the economy, declaring that incomes were now outpacing subsiding inflation.
A new Reuters-Ipsos poll taken from Monday to Wednesday shows the Democratic president trailing Trump by six percentage points amid widespread voter apathy towards both candidates.
“Overall, the Biden administration has put in place the most extensive set of policies and investments to benefit the middle class and grow the economy that our country has seen in my lifetime,” Yellen told the Economic Club of Chicago.
She said the major components of “Bidenomics” – a $1.9 trillion COVID-19 rescue package, a $1.2 trillion bipartisan infrastructure bill, a $52 billion investment in semiconductors and research, and a $430 billion clean energy and healthcare law – were aimed at enabling the middle class to drive the economy again.
That spending allowed the U.S. economy to emerge from the COVID-19 pandemic with historically low unemployment and avoid the slow, painful recovery from the 2007-2009 recession that was sparked by the global financial crisis.
“Put simply, it’s been the fairest recovery on record. We see this in gains not only for middle-class Americans but also across demographic groups, such as the rapid decline in unemployment rates for Black and Hispanic Americans,” Yellen said.
The jobless rate in December for Blacks was 5.2%, the lowest since last April’s historic low of 4.8%. For Hispanics, it was 5%, the highest since last February. Both groups saw unemployment rates in the high teens during the pandemic.
NOT ‘TRICKLE-DOWN’ ECONOMICS
Yellen said Trump’s major economic policy was a 2017 Republican-backed tax cut package that increased the U.S. deficit by $2 trillion over 10 years and prioritized tax cuts for corporations and top earners, “while doing little to spur investment.”
She told reporters separately that it was important to explain why Biden’s strategy “is the right one and why cutting taxes for the rich and hoping that the benefits trickle down widely is not the right strategy.”
Trump’s tax cuts did extend to middle- and lower-income tax brackets, but other benefits were reduced, including capped deductions on state and local taxes and home mortgage interest, which boosted some middle-class tax bills.
Trump’s tax cuts for individuals expire in 2025, and Yellen said Biden would seek to use a tax code revamp next year to make wealthy people and corporations pay more, keeping an “ironclad commitment” not to increase taxes on those earning under $400,000 annually.
Biden’s investments in infrastructure, technology and clean energy are “not trickle-down economics,” she said. “It’s investing in ways that really everybody knows we need to invest, but just haven’t.”
INFLATION HURDLE
Yellen said she plans to “spend a lot of time” talking up Biden’s economic achievements in the coming months, including touting the recent decline in inflation.
But the memory of the first major price shocks in nearly two generations may take a while to fade in the minds of voters, said Charles Franklin, director of the Marquette Law School Poll in Milwaukee, which Yellen will visit on Friday.
Franklin said that price increases loom larger in voters’ minds, with twice as many respondents in recent polls reporting hearing about inflation than about low unemployment.
“I think people take low unemployment for granted now and so they don’t give much credit for it,” said Franklin, a Marquette law and public policy professor.
The school’s November poll showed only 27% of voters rated the economy “excellent” or “good,” with 40% saying “not so good” and 33% “poor.” Of voters polled, 51% rated Trump better on the economy, versus 30% for Biden, results that track responses in Wisconsin, considered a key battleground state in the Nov. 5 election.
A new poll from the school is due on Feb. 7.
“They’ve got 10 months now to make people perceive changes. I think one part of it is talking about the positive change, the decline in inflation, the ‘soft landing’ without a recession,” Franklin said, adding that major investments like $1 billion in federal funding for a new bridge between Superior, Wisconsin, and Duluth, Minnesota, can help.
Yellen acknowledged that lower inflation is not the same as deflation and some prices, such as for food and rent, remain higher, but she emphasized the wage gains that are being made.
“I think over time the fact that a restaurant meal cost you so much back in 2019, it just becomes less relevant. Inflation hasn’t really moved down,” she said. “Real wages are rising.”
(Reporting by David Lawder; Editing by Paul Simao)