Ronald Reagan closed his presidential debate with Jimmy Carter in October 1980, urging Americans to ask themselves if they were better off than they were four years ago. Of course, Reagan, like a sharp prosecutor, knew the answer before he posed the question. Inflation and unemployment were soaring. Perhaps the reason why Republicans aren’t posing that question today is that they, too, know the answer. Based on jobs, incomes, wealth, poverty, and health insurance, Americans are better off today, including inflation.
No one can argue with President Joe Biden’s job record—more than 9.5 million unemployed Americans found jobs over the past 18 months, and the unemployment rate fell from 6.4 to 3.5 percent.
Whether Americans’ incomes are higher is more complicated, because the pandemic disrupted the economy in so many ways. First, GDP collapsed in 2020, and unemployment soared—followed by massive public spending that extended into Biden’s term in 2021 and helped us recover. But supply problems, especially energy, ignited inflation, and spending, worsened it. While the fast-rising employment has produced a record 14.9 percent surge in overall wage and salary income since Biden took office, how much has inflation eaten away at those unparalleled gains?
For all of the “pain at the pump” stories, the answer is that wages and salaries have kept pace with inflation since Biden took office—and by this measure, most Americans are much better off than before the pandemic hit in 2020, and before he took office in 2021.
The Bureau of Economic Analysis at the Department of Commerce provides the best data on the nation’s earnings. It reports that before adjusting for inflation, Americans earned $11,346 billion in wages and salaries in June 2022, a 14.9 percent jump from $9,872 billion in January 2021 and 16.6 percent more than the $9,734 billion total in February 2020, just before the pandemic. So, take account of inflation’s impact by applying the BEA’s deflator for personal consumption expenditures, a better inflation measure than the Consumer Price Index (CPI). Using that deflator raises the original wage and salary total, now expressed in June 2022 dollars, to $10,673 billion for January 2021 and $10,717 billion for February 2020. Finally, divide the three results by the number of people earning wages and salaries on each date.
The math may sound complex, but in fact it’s simple: In June 2022, the average working American earned $74,643 in wages and salaries, compared to $74,624 in January 2021 and $70,274 in February 2020. Even with 9.5 million more people working, the average working person earned as much in June, after inflation, as when Biden took office. And compared to just before the pandemic, when employment was comparable to today, the average person earns 6.2 percent even after inflation. The answer to Reagan’s question is “Yes” on wages and salaries as well as jobs, a remarkable achievement given the pandemic.
A technical note: Other data, especially from the Bureau of Labor Statistics (BLS), suggests that wages and salaries have not kept pace with inflation. Like most economists, I rely on the BEA because the deflator for personal consumption spending is more accurate than the CPI and because the BEA’s data on wages and salaries is more complete than the BLS’s. Both depend on the National Compensation Survey. But the BEA adjusts for gaps in the survey, including people working in private households, employees of nonprofit and religious membership organizations, and so on. The BEA also adjusts the NCS data for COVID-19’s impact on the collection of that data, using analyses by the Federal Reserve and others.
Americans are also significantly wealthier than before Biden took office. The pandemic and the jobs boom were primarily responsible. As the Omicron variant spread, government checks enabled more savings and increased spending that helped drive up employment. According to the Federal Reserve, after inflation the net assets of Americans increased by nearly $2 trillion from the first quarter of 2021—when Biden took office—to the first quarter of 2022. (We exclude the top 1 percent because their assets are notoriously hard to measure.)
And it’s not the typical case of the rich getting richer. The fastest growth in net assets occurred among low- and moderate-income households. From the first quarter of 2021 to the first quarter of 2022, the inflation-adjusted wealth of households in the lowest income quintile jumped 15.2 percent and just 0.8 percent for those in the top income quintile (again, excluding the top 1 percent).
Under Biden, Americans are better off in other ways, too. The Center on Poverty & Social Policy at Columbia University reports that the poverty rate, which reached 16.1 percent in December 2020, fell sharply under Biden to 14.1 percent by May 2022. It’s the same story on health care coverage: The Department of Health and Human Services reported that from late 2020 to early 2022, the percentage of uninsured Americans fell from 14.5 percent to 11.8 percent among adults (ages 18 to 64) and from 6.4 percent to 3.7 percent among children, both record lows.
If not for the pandemic and the policies required to address it, inflation would be modest—and but for the inflation, Biden would have one of the best records of any postwar president (at least thus far).
Imagine how Donald Trump would brag if he could tout record job creation, record low poverty, and record health insurance coverage—not to mention wealth gains and wage and salary gains that kept up with inflation. That’s a message that Democrats should carry into the fall campaigns.