With more than a nod to Franklin Delano Roosevelt’s launch of the New Deal, President Joe Biden, assuming the leadership of a stricken nation in a stricken world, launched an agenda intended to change the nation’s course. As Biden marks the first 100 days of his administration, an increasing number of Americans are feeling good about the economy: Workers are getting vaccinated and anticipating a return to their workplaces; business is benefiting because people are shopping and starting to travel; investors are betting on a brighter future.
The U.S. economy is one that runs on sentiment and, right now, sentiment is better than it’s been in over a year.
A recent NBC News poll found that 52 percent of Americans approve of Biden’s handling of the economy. More telling is that 69 percent approve of his handling of Covid-19. Likewise, the 61 percent of respondents who think the worst of the pandemic is behind us. That optimism fuels consumer spending, which creates demand, which results in jobs.
We don’t have measures of the economy that relate all that directly to how people “feel,” which is why the stock market — the Dow Jones Industrial Average, in particular — has become something of a proxy for how the economy is doing. It’s up there all day in the corner of cable TV screens, keeping score of something vaguely tied to the economy. Green is good; red is bad. Lately, there’s been a lot of green.
But the stock market isn’t as good a measure of the economy as it used to be, as differences between wealthy investors and those who depend on work for their income become more pronounced.
This stock market is up, in part, because investors think the pandemic is ending and, like the Roaring ‘20s that followed the 1918 pandemic, consumers who have been shut in for the last year are going to spend like it’s 1920.
Still, it’s a widely used barometer, and if it is going to be considered, it’s better to look at the S&P 500 index, which is made up of 500 major stocks, as opposed to the narrower 30-stock Dow, which was former President Donald Trump’s preferred metric to quote. The S&P 500 is up 10 percent since Biden’s inauguration. That’s incredible for a little over three months, given that annual returns on the index — which a good 401(k) or IRA should mimic — have been averaging about 9.2 percent growth over an entire year.
But there are two things to consider when thinking about presidents and stock markets. One, presidents take altogether too much credit for good markets. Two, presidents get too much blame for bad markets.
This stock market is up, in part, because investors think the pandemic is ending and, like the Roaring ‘20s that followed the 1918 pandemic, consumers who have been shut in for the last year are going to spend like it’s 1920. That’s not to say Biden has zero influence here, as a president who doesn’t ignore or minimize one of the greatest crises to have ever struck the nation.
But the larger force driving markets higher is basic economics: The Federal Reserve has continued a long-standing policy of maintaining low interest rates. That makes investing in the stock market and real estate more attractive, with keeping money in bonds and bank accounts simply not paying much these days.
Historically — and somewhat counterintuitively — stock markets perform marginally better under Democratic administrations than Republican. That surprises some, given Republican branding as being pro-business.
What Republicans sometimes achieve — and what Trump succeeded brilliantly at — is unleashing "animal spirits," as I call them, the psychological and emotional factors that drive investors to take action. Animal spirits are unleashed when investors believe that circumstances are ripe for investment: low interest rates, deregulation and government action to support economic activity.
Two of those pre-conditions are met right now, but Democratic governments, generally, mean more regulation than less. And the Biden administration, in particular, feeling pressure from the left flank of the Democratic Party, may be inclined to make up for the deregulatory tear that the Trump administration was on. That often scares investors. Interestingly, in these first 100 days, it hasn’t.
That’s good for the upper class, but for more than half of Americans, their prosperity doesn’t depend on stock market performance. For them, job creation — an opportunity for career growth, mobility and better wages — is primary. Biden has pushed, so far unsuccessfully, to increase in the federal minimum wage from $7.25 and hour to $15 an hour. Republican Sens. Mitt Romney and Tom Cotton have proposed a $10 an hour minimum wage, so some increase is possible.
Biden has separately taken executive action to ensure government contractors don’t pay workers less than $15 an hour, but government action is only one way to increase wages. The more organic, and less political, way to do so is through an increase in consumer demand and more economic activity — both of which cause companies to compete for workers, which lowers unemployment and raises wages. Some of that is happening, but it’s slow going. The nonpartisan Congressional Budget Office estimates the U.S. won’t hit its pre-pandemic employment rate until 2024.
There is a third option: infrastructure, which encourages and supports private-sector economic activity and takes advantage of the low interest rates that make borrowing cheaper than ever. The American Society of Civil Engineers, which, admittedly, has a dog in this hunt, gave America a grade of C- on infrastructure and estimated that between now and 2039, the U.S. will need to spend $13 trillion to remain competitive globally.
Much of that money will come from the private sector, with government acting as a catalyst. Biden has proposed $2.3 trillion in federal infrastructure investment, which the White House, inventively, calls the American Jobs Plan to emphasize the job creation aspects rather than the roads and bridges that we typically think of.
Infrastructure should be bipartisan: It promotes partnership between the private and public sectors and is good for business, job creation and standard of living. But these days virtually nothing spans both aisles.
Despite the fact that Trump himself tried — and failed — to make infrastructure a cornerstone of his legacy (with numerous “infrastructure weeks” that he derailed himself), including with his own proposal that was nearly as big as Biden’s, Republicans are balking at the American Jobs Plan. Among their stated reasons are both the price tag and how Democrats are expanding the definition of infrastructure to include environmental measures and what the administration calls the “care economy,” which would raise wages for caregivers and home health care workers.
This means passing one infrastructure bill through Congress — let alone the two that Biden is proposing — is going to be a heavy lift. Republicans are proposing a much more modest undertaking, or none at all. And infrastructure spending can’t materialize via executive order.
Passing one infrastructure bill through Congress — let alone the two that Biden is proposing — is going to be a heavy lift.
The most recent NBC News polling indicates 59 percent of Americans support Biden’s infrastructure plan, which suggests that at least some Trump voters like it. But what Biden needs to get it passed are GOP votes in the Senate. He’s going to have to spend some political capital and make some uncomfortable compromises to get that — that second 100 days of his are going to be crucial to making his plans into reality.
Before FDR used it for what was, essentially, an infrastructure plan, the first 3 1/2 months of a presidency passed without fanfare. Immediately after his inauguration in 1933, Roosevelt summoned Congress to a three-month session to pass multiple bills — the beginnings of the New Deal — designed to offset the effects of the Great Depression. On July 24, 1933, Roosevelt delivered a radio address to describe what he has accomplished in his first 100 days. A milestone was born.
Like Franklin Delano Roosevelt and the New Deal in the 1930s, or Dwight D. Eisenhower and the Federal-Aid Highway Act of 1956, the American Jobs Plan is poised to cement Biden’s legacy. Conversely, failure to do so could be his undoing.
