Biden should learn a lesson from Argentina: ‘It’s (still) the economy, stupid’

In 1992, Bill Clinton’s campaign strategist, James Carville, famously boiled down the issues facing the country to one irreverent sentence: “It’s the economy, stupid.” That’s not the case in every election, but it is increasingly likely to be true in 2024, even though both parties seem to be content to ignore the economy entirely.

In Argentina last weekend, voters made an unconventional choice for president, electing Javier Milei — a self-proclaimed “anarcho-capitalist” economist — over the more mainstream choice of the ruling party’s economy minister, Sergio Massa.

That should not be a total surprise. The Argentine economy over which Massa presided has been in shambles for decades. The most recent problems involved triple-digit inflation and a government with no clear plans to get out of it, only a desire to keep printing more money.

As money becomes increasingly worthless and poverty stubbornly increases, people become willing to try something — anything — to get out of the doom spiral.

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Enter Milei. His social views may be more to the right than the average Argentine voter would typically tolerate (and his running mate’s opinions on the military junta that ruled the country from 1976 to 1983 are troubling, to say the least), but compared to an establishment that has failed the people again and again, he looks, to some, like a viable option — or so his 11 percentage point victory would suggest.

This is a lesson for leaders of other countries, even those that — like ours — are not nearly so financially troubled as Argentina.

At the dawn of the 20th century, Argentina and the United States were at a similar level of economic development and wealth. Since then, their paths have diverged considerably. But some things are the same the world over. One of these is that people really hate inflation. It is a silent tax, depleting people’s hard-earned savings and making their paychecks cover less and less of their needs. A recent Gallup poll found that inflation was by far the part of the economic picture Americans found most troubling.

Politicians hate it, too — anything that makes voters unhappy is bad news for elected officials. But the temptation to pump as much money into the system as they can is always there. There’s no such thing as a free lunch, the old saying goes, and it’s true.

President Ronald Reagan and Federal Reserve Chairman Paul Volcker crushed America’s last bout of high inflation in the early 1980s. Congress and the Fed kept inflation low for so long that people like me, who came of age in the 1990s, never really knew inflation except through history lessons. When our parents would talk about 13% mortgage rates when they first bought a house, we’d think, “That sounds awful. Good thing that problem has been solved!”

But people forget the lessons of the past, and problems don’t stay solved. Democrats and Republicans reached across the aisle during the pandemic to spend money the country didn’t have.

As the pandemic ended, the money kept on flowing. Supply-chain interruptions played a role in the ensuing economic chaos, but more money chasing the same amount of goods will result in inflation every time. The Republicans are growing a little backbone about it lately, but without control of the government, there will just be more ham-fisted negotiations and government shutdowns.

Meanwhile, deficit spending goes on, the economy limps along, and the Biden administration acts as though everything is fine. They’ve tried to take the Republican epithet of “Bidenomics” and reclaim it, the way President Barack Obama eventually reclaimed the name “Obamacare” for his signature legislative accomplishment.

The problem is that this economy is a lot less popular than the Affordable Care Act. In August, Gallup found that only 37% approved of President Joe Biden’s performance on the economy, worse than his overall job approval rating of 42%. The administration’s response has been mostly to tell people that they’re wrong and that the economy is actually good. That didn’t work for George H.W. Bush in 1992, it didn’t work for Massa, and will not work for Biden.

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One problem is that while wages have risen throughout Biden’s presidency, inflation has risen faster. That’s starting to change, but the facts are baked in already. Average Americans saw their real earnings decrease (meaning that they can’t buy as much now), even if the number on the pay stub is higher.

Another problem is that while the rate of inflation has fallen from its height of 9.1% in June 2022 to 3.2% last month, that doesn’t mean the prices went back to normal. Those new, higher prices are still with us and climbing all the time, if more slowly. Biden and his administration crow about inflation going down, but people go to the supermarket and see higher prices. The disconnect is clear, and people don’t like to be told not to believe their own eyes.

In Argentina, high inflation was enough to get people to vote on economic issues over social issues, but 100% inflation is a whole lot different from 9%. Similar reasoning from voters here might explain Donald Trump’s recent run of good head-to-head polls against Biden.

The folks in the White House should consider fixing the problem instead of denying it exists.