May 23, 2024 - Politics & Policy

Biden's fast food problem

The line chart shows a steady change in fast food prices and non-manager wage indices January 2017 to March 2024. The growth in meals at limited service eating places slightly outpaces the growth in average hourly earnings over this period.
Data: Federal Reserve Bank of St. LouisBEA; Chart: Axios Visuals

Working class voters are unhappy about President Biden's economy. That may be partly due to the price of their Happy Meals.

Why it matters: Fast food restaurants have had some of the sharpest price hikes during the Biden administration, higher than both grocery bills and gas prices.

Zoom in: The average price of "meals at limited services eating places" has outpaced wage gains for workers since before the pandemic, according to the Bureau of Labor Statistics.

  • Prices are up 31%, vs. average hourly earnings up 25%.

Then there's the Federal Reserve, which has raised its key interest rate to 5.25% to 5.5% to fight inflation.

  • That's a direct hit for poorer Americans, who tend to run balances on their credit cards.
  • The average credit card APR is now 22%, according to the latest Fed data.
  • A record 9% of credit card balances fell into delinquency over the last year, according to the Federal Reserve Bank of New York.

Zoom out: Five months before the election, America is a tale of two economies.

  • For wealthier households, smirking about their low fix-rate mortgages, the Fed's aggressive rate hike just doesn't sting that much, if at all.
  • The S&P is up 12% on the year, frequently flirting with new record highs.
  • And just as the poorer Americans are moving towards Trump, wealthier Americans are heading in Biden's direction.

By the numbers: In 2020, Biden beat Trump 55%-44% in households earning less than $50,000. In households between $50,000-$99,000, Biden had even bigger margins, at 57%-42%.

  • Four years later both candidates have eaten into each other's leads, according to an April Economist/YouGov survey.

The intrigue: Economists disagree on how much wage growth Americans have experienced under Biden when inflation is factored in.

  • Since the end of 2020, Americans are making less money, adjusted for inflation, in five of eight scenarios in a clever interactive tool from the Hamilton Project.
  • Biden advisers can take comfort from a new study by the Congressional Budget Office, which shows that Americans across income brackets are spending a smaller share of their income on the same bundle of goods.
  • But it's the top 20% that have seen the biggest boost.

What they're saying: "President Biden knows too many families are struggling with prices that remain too high, which is why fighting inflation remains his top economic priority," said White House Spokesperson Jeremy M. Edwards.

  • "Under his watch, record job growth and factory construction are empowering workers to get better jobs with better pay."
  • "The good news is that wage growth has been outpacing inflation for more than a year," said Ernie Tedeschi, the director of economics at the Yale Budget Lab, and the former chief economist at the White House Council of Economic Advisers under Biden.
  • "But it will take more of that before consumer attitudes about prices brighten back up," he said.
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