Welcome to POLITICO’s West Wing Playbook, your guide to the people and power centers in the Biden administration and Harris campaign. Send tips | Subscribe here | Email Eli | Email Lauren The administration’s “Bidenomics” era is ancient history. Since becoming the Democratic nominee, Vice President KAMALA HARRIS has narrowed former President DONALD TRUMP’s advantage on the economy — not by citing jobs numbers and pleading with voters to appreciate JOE BIDEN’s record, but by outlining an economic agenda of her own. Strategically, it makes sense: addressing voters’ concerns, not hectoring them about how good things are. But the economy, in the macro sense, is objectively good. Maybe even great. “There is no denying it: This is among the best performing economies in my 35+ years as an economist,” MARK ZANDI, Moody’s Analytics’ chief analyst, wrote in a lengthy post on X on Sunday outlining the positive data and acknowledging areas of concern. “In my time as an economist, the economy has rarely looked better.” We asked Zandi — a favorite of the West Wing during BARACK OBAMA’s administration, particularly because of his role on JOHN McCAIN’s 2008 campaign — to expand on that and to help us understand the bigger voter disconnect. Our conversation has been edited for clarity. Okay, what makes this economy so remarkable? There are clearly soft spots. But if you look across the wide expanse of a $30 trillion economy, it's about as good as it gets. Growth is strong, unemployment is low, inflation is back to target. Stock markets are hitting record highs. Values are record highs. Corporate earnings are surging. The president has been blamed by Republicans, and a majority of voters, for high inflation. Should he get more credit for all of this? There's a long list of reasons why the economy is now performing well. Policy is on the list. So I think he deserves some credit. The much maligned American Rescue Plan, ultimately, was successful. It allowed the economy to come roaring back. But it did lift inflation, no? It’s hard to remember back, but in the summer and fall of 2021, that was deemed to be good inflation, because we had been through a period of sub-optimal inflation since the financial crisis. The Fed, in its 2020 policy framework document, articulated the perspective that if inflation was below target for a while, then we should be above target for a while. And that's what they got. The whole narrative around the ARP would have been very different if not for the fact that the [Russia-Ukraine] war hit in early 2022 and caused oil, natural gas, agricultural prices to go skyward, and for that shock to conflate with the pandemic and affect inflation expectations. So inflation is coming down. The Fed finally just cut interest rates by half a point. What explains this soft landing? The negative supply shocks — the war, the pandemic — are fading away, and we've benefited from some positive supply shocks. Such as? First, immigration — the benefit of that was tremendous growth in labor supply when we needed it the most, when the labor market was tightest. It allowed the Fed to avoid having to jack up rates further. And then the productivity boom. The other positive supply shock is the surge in oil production here in the United States. One concern was that oil prices were going to go skyward when the Saudis were cutting — the Russian sanctions, and then the problems in the Middle East. And instead, oil prices have gone south, and that’s primarily because of the ramp-up and now record amount of oil production in the U.S. So the economy on the whole is very healthy. But do you think this president, who talks about helping and growing the middle class, has done enough on that front? I don't. There's been progress there — look at wage growth since the pandemic. But a lot of those people in the bottom third of the economy, they don’t own stock, many don’t own a house and have now been locked out. And a lot of them, they borrowed heavily against their credit cards and took out consumer finance loans when inflation was raging to supplement their income, to maintain their purchasing power. It's one thing when rates are low. But interest rates on credit cards today are 22 percent, a record high. That's a real problem. So what economists are saying may be true and may also strike people as out of touch. I get why, for a lot of Americans, this happy talk from economists like me doesn't resonate. People are still paying a lot more for the things that they need to buy. And there’s no game changing event that’s going to shift sentiment. But with each passing month where inflation is low and wage growth is stronger, people are going to start feeling slowly, steadily better about things. Harris herself has said economists think her plans — addressing housing affordability, boosting manufacturing, providing more tax credits for small businesses and working families — would “strengthen the economy” while Trump’s would weaken it. Is that really what economists believe? There are a lot of views here, and far from unanimity among economists about what Harris is putting forward. But most economists think the proposals that President Trump is putting forward will diminish the economy. Tariffs? If you put 100 economists in a room, 98 will tell you that's a really bad idea. Mass deportations? That’s a bad idea. For the president to have an input into the interest rate decision-making process of the Federal Reserve is a really bad idea. Most economists would say that's really not the policy path you want to go down. MESSAGE US — Are you VALERIE ONG, deputy director of employee engagement and leadership development? We want to hear from you. And we’ll keep you anonymous! Email us at westwingtips@politico.com. Did someone forward this email to you? Subscribe here!
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