Challenges Ahead: Economic Concerns and Inflation Spell Trouble for 2024 Elections

President Biden’s re-election prospects face serious challenges. Despite public approval for many of his initiatives and strong disdain for former President Trump’s and his most ardent supporters’ behaviors, polls increasingly show Biden losing enough swing states to shift the electoral college in Trump’s favor.

A myriad of factors will determine the outcome of the election, including perceptions of the economy. Conversely, the economy is likely to see greater volatility in 2024 due to the election and abnormally heightened emotions. We will watch events unfold between the oldest sitting president whose challenge may be remaining fully functional and a former president who never concedes he has lost anything and thrives in a litigious world increasingly supported by social media and thugs. Unfortunately, we seem to be debating the typical liberal versus conservative views while standing on a tinderbox in a new technological world where AI can create more powerful false narratives.

READ: AI in Journalism — Transforming News Reporting and Storytelling (For Better or For Worse)

Of all the economic issues, inflation, despite dropping substantially in 2023, is the greatest threat to Biden’s re-election. Bidenomics, an effort to brand his campaign for economic achievements, was viewed unfavorably by a 2:1 margin in an October Bloomberg poll, while the individual economic components pushed through under the Biden administration are viewed positively by the majority of likely voters. A big part of the negative perception results from inflation rates of 6.5% to 7% after the pandemic and even higher rates in the housing sector for renters or new home buyers.

Currently, inflation has dropped to 3.5%, which is above the average rate of 2.9% the last 100 years. During the last century, the median rent in the U.S. increased from $60 in 1920 to $2,000 today (3.6% average annual compounded) and will be $62,000 in another 100 years. While the numbers are astounding when viewed in a 100-year context, the annual incremental increase of 3.5% is generally normal. 

Unfortunately for Biden, the Federal Reserve has created a widely publicized expectation that inflation should be managed to 2%. While that would be great, it happens infrequently and I believe is unattainable. We have the largest generation in American history, the millennials, dramatically increasing demand across the economy, especially for housing while the boomer generation has drastically decreased their productivity by retiring from the labor market.

The result is an inflationary labor market and the lowest unemployment rate in decades. To make matters worse, the new national agenda to bring a lot of manufacturing back to America reverses actions that helped keep prices down since the 1980s. Similarly, inflationary pressures come from a flood of migrants across the southern border until we integrate them, even if temporarily, into the labor market. The migrant situation will add fuel to the housing fire which will continue until baby boomers “permanently retire.” These realities will not change with the next president. 

READ: The Economics of Housing Inflation in Colorado — Exploring the Supply and Demand Imbalance

The greater long-term concern among the political right is the sustainability of the federal debt. Even many moderates, who will swing the election one way or the other, are fiscally conservative and socially progressive. While investment in infrastructure is desirable as it pays economic dividends in the future, there are important ramifications to printing and distributing “helicopter money” for all to enjoy.

It tends to be inflationary and will become more so over time; possibly at exponentially increasing rates. The 90-day debt obligations of the United States government are the benchmark of global economic stability defining “risk-free” in the financial world. When the day of reckoning arrives sometime in the coming decades it will be a worldwide calamity that could constrain needed public and private investment to adapt to the concurrent devastation related to climate change. 

Sooner or later, even central governments must own up to what they owe by dramatically cutting costs, increasing taxes and/or defaulting on their debt, leaving creditors with worthless paper and an unwillingness to lend more. When this occurs, economies transform radically and social safety nets dissipate.

Social strife escalates. Democracy can evaporate. If wars erupt, national defense demands higher budgets, which requires even more money printing, leading to hyperinflation where the monthly rate of inflation far exceeds what we experience now on an annual basis. Under such circumstances, our children will experience rapid declines in wellbeing. To get a good sense of this, look at Venezuela, which is the primary source of the current mass migration to the U.S..

I’m convinced that the number one economic goal of people is stability. We want to know our economic approach to meeting basic needs tomorrow will be like the past. Sure, economic thriving is much nicer than surviving, but knowing we have a secure base provides the greatest increment to our wellbeing.

America’s economy has become the envy of the world because we have a long history of economic stability, which we have built upon. Now, if we could just get to the issues rather than age, personalities and political drama highlighted by physical threats. I wish both Biden and Trump would abandon their campaigns and let two new fresh faces step forward. If one side changes their top candidate, I predict they will win the presidential election. Imagine that — personal egos subjugating to our national wellbeing.  

Tom Binnings is a senior partner at Summit Economics in Colorado Springs. He has more than 30 years of experience in project management, economic and market research, real estate development, business analytics and strategic planning. He can be reached at (719) 471-0000 or [email protected].