WASHINGTON — President Joe Biden argued Tuesday that his economic plan is working despite predictions of a recession by economists, a looming battle over paying the country’s debt and a nation that feels like it's on shaky economic footing.
The economy played a prominent role in Biden’s State of the Union address with a message largely targeted at lower- and middle-income Americans as he made the case for boosting manufacturing jobs and buying more products made in America. He proposed raising taxes on corporations and the wealthiest Americans to help fund programs to lower health care and child care costs.
"For decades, too many people have been left behind and treated like they’re invisible. Maybe that’s you watching from home," Biden said. "Remember the jobs that went away? You remember them, don't you? The folks at home remember that. You wondered whether the path even existed anymore for your children to get ahead without having to move away. Well, I get that. That’s why we’re building an economy where no one’s left behind. Jobs are coming back. Pride is coming back."
Biden was making the case for his administration’s handling of the economy to a largely skeptical audience. After having been battered by decades-high inflation for more than a year, consumer sentiment remains low by historic norms, and two-thirds of consumers said they expected an economic downturn this year, according to the University of Michigan’s latest consumer sentiment survey.
In a separate poll by Gallup released Monday, more than two-thirds of respondents said they expect inflation to rise, nearly half said they expect the market will fall in the first half of 2023, and 3 out of 4 said they were planning for interest rates to continue to rise. Voters have placed their economic pessimism on Biden, with 61% saying in an NBC News poll last month that they disapproved of his handling of the economy.
“You have in one sense a labor market that’s fairly strong and steady. We certainly see strong consumer spending, which is another measure of sentiment, and yet clearly the high prices have been something that has really been a gale-force wind that a lot of consumers have had to contend with for over a year,” said Joe Davis, the global chief economist for the investment firm Vanguard.
Biden laid out the progress he said his administration has made with the passage of laws to spur investment in manufacturing of semiconductors and clean energy technology and to rebuild the country’s infrastructure.
“Let’s look at the results,” Biden said. “We’re not finished yet by any stretch of the imagination, but the unemployment rate is at 3.4%, a 50-year low, near-record unemployment for Black and Hispanic workers. We’ve already created, with your help, 800,000 good-paying manufacturing jobs, the fastest growth in 40 years.”
Biden called on Congress to do more to lower costs for Americans by capping the price of insulin, restoring the child tax credit and improving access to affordable housing.
To pay for those efforts, Biden proposed closing tax loopholes and increasing taxes on the wealthiest Americans, as well as corporations, including quadrupling the tax on corporate stock buybacks, which companies use to bolster their stock prices.
"I'm a capitalist, but pay your fair share," Biden said. "I think a lot of you at home agree with me and many people that, you know, the tax system is not fair. It is not fair."
Biden acknowledged the price pressures Americans have been under but sought to highlight the progress that has been made in lowering inflation.
“We’re better positioned than any country on Earth right now, but we have more to do,” Biden said. “But here at home inflation is coming down, here at home gas prices are down $1.50 from their peak, food inflation is coming down — not fast enough, but coming down. Inflation has fallen every month for the last six months, while take-home pay has gone up.”
Ahead of the speech, outgoing White House economic adviser Brian Deese said Biden was aiming in the remarks to convey that while there is more work to be done, the progress so far should make Americans optimistic about the path forward for the economy.
“The president uniquely understands that we have a lot more work to do when it comes to the economy,” Deese said at the White House news briefing Monday. “And that even as we’ve seen real progress and inflation coming down, over the last six months in particular, we have more work to do to bring prices down, lower costs and create some breathing room, as he says, for American families.”
Biden stands little chance of getting any of his economic policy proposals through a divided Congress, as Republicans have sought to pin the blame on him for inflation and the rising debt.
Economists have said a number of factors have contributed to inflation over the past two years, including Russia's invasion of Ukraine, supply chain disruptions from the coronavirus pandemic, low interest rates and shifts in consumer spending. Several economic studies have also found that the Covid stimulus bill Biden pushed in his first year in office also contributed to inflation, although they are divided over just how much.
Republicans have been threatening to block legislation to raise the debt ceiling, which the federal government must do to continue paying its bills, unless Democrats agree to budget cuts to lower the deficit.
Biden said his budget for the coming fiscal year would cut the deficit by $2 trillion more, in part by raising taxes on corporations and people making more than $400,000.
When Biden accused Republicans of threatening to cut Medicare and Social Security to reduce government spending, he was met with boos from Republicans. Biden seized on the moment to take the prospect of such cuts off the table in negotiations.
"As we all apparently agree, Social Security and Medicare is off the books now," Biden said. "All right, we've got unanimity."