President Joe Biden has spoken regularly about the economy in the past month — trying at once to reassure Americans about inflation, draw attention to job growth and earn support for his signature infrastructure and social spending proposals.
But some of Biden’s economic claims aren’t true. And some of them are missing important context.
Let’s look at four of the things he said in November and on the first day of December.
The unemployment rate
In an economic speech last week, Biden made a series of comments about the unemployment rate.
“We’ve made historic progress over the last 10 months. Unemployment is down to 4.6%, two years faster than everyone expected. When we started at this job, it was over 14%,” Biden said.
Facts First: Biden was wrong in two ways here. First and most importantly, his phrasing created the inaccurate impression that the unemployment rate was over 14% when he “started at this job” as president. In fact, the unemployment rate in January 2021, the month he was sworn in, was 6.3%; it had not been above 14% since April 2020. Second, while the unemployment rate has fallen faster under Biden than some experts had expected, he exaggerated when he said the 4.6% rate was achieved two years faster than “everyone” expected. It happened roughly one year faster than the Federal Reserve had projected in December 2020.
Biden strongly suggested that all of the “historic progress” in bringing the unemployment rate down from more than 14% to 4.6% happened “over the last 10 months,” the period in which he has been in office. But the majority of the decline occurred during the final months of Donald Trump’s presidency.
The unemployment rate spiked under Trump on account of the Covid-19 pandemic, jumping from 3.5% in February 2020 to a pandemic-era peak of 14.8% in April 2020. Then the rate started falling, hitting 6.3% in January 2021. So far, through October, it has fallen another 1.7 percentage points during Biden’s tenure.
A White House official, who responded to CNN’s questions on condition of anonymity, said that when Biden spoke about unemployment being above 14% “when we started at this job,” he was referring to the peak of the pandemic, not the start of his presidency.
But this section of Biden’s speech was focused on the achievements of his administration over the past 10 months. He certainly didn’t make it clear that, for this particular claim, he was reaching back to a starting point during the last year of the Trump era.
As for Biden’s claim about the 4.6% rate being achieved “two years faster than everyone expected”: “Everyone” was too strong. The Federal Reserve, for one, projected in December 2020 that the unemployment rate would average less than 4.6% — 4.2%, to be precise — in the fourth quarter of 2022. (The Federal Reserve projection is a median of projections from Federal Reserve Board members and Federal Reserve Bank presidents.)
The White House official said Biden was referring to how the 4.6% rate had been achieved two years faster than the Congressional Budget Office had projected. But Biden said “two years faster than everyone expected,” not “two years faster than the Congressional Budget Office expected.”
The Nobel winners and inflation
To promote his Build Back Better Act, a $1.9 trillion bill that would expand the social safety net and fund initiatives to address climate change, Biden has repeatedly cited an important line from a September open letter that was signed by 17 winners of the Nobel Prize in economics.
The President said in an economic speech on Wednesday: “Seventeen Nobel laureate winners … have written a letter affirming that this bill will reduce inflationary pressure in the economy.” He tweeted on November 21: “As 17 Nobel Prize winning economists have declared: My plans will ease inflationary pressures.” He wrote in a statement on November 10: “17 Nobel Prize winners in economics have said that my plan will ‘ease inflationary pressures.’ “
Facts First: Biden left out a key phrase from the Nobel winners’ letter — in which they made it clear that they weren’t saying the President’s plan would alleviate the inflation affecting the country right now. Rather, the Nobel winners wrote that Biden’s agenda would alleviate “longer-term” inflationary pressures. The relevant sentence read as follows: “Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy, it will ease longer-term inflationary pressures.” The letter did not discuss the issue of short-term inflation.
It’s normal for politicians to paraphrase experts rather than quoting their every word, but this Biden omission significantly changes the meaning of the Nobel winners’ sentence. When CNN reached out last week to two of the letter’s signatories, both of them made clear that the phrase “longer-term” was significant.
Christopher Sims, a Princeton University professor of economics, said in an email: “So long as the legislation retains significant revenue raising as it goes through the Senate, it will probably have little short-term effect on inflation, and could even, by demonstrating that Congressional near-deadlock is not preventing significant revenue-raising, dampen medium term inflation. Nonetheless the impact of the legislation on inflation is uncertain, especially in the near term, so the letter’s ‘long term’ phrase was important.”
Eric Maskin, a Harvard University professor of economics and mathematics, said in an email: “The two pieces of legislation — the infrastructure act and the (Build Back Better) bill — have the potential to reduce inflationary pressure in the longer term because they should expand productive capacity and therefore supply. It is much harder to say what their effect on inflation might be in the short to medium term.”
It’s worth noting that Biden sometimes did include a reference to the “longer-term” phrase when discussing the letter; he did so in a speech in Minnesota on Tuesday. Still, he has more often left it out. The November 10 written statement featured the most egregious of the omissions: The President — or, more likely, an aide writing under his name — put the words “ease inflationary pressures” in quotation marks, suggesting he was giving a direct quote from the letter, but still left out the phrase “longer-term.”
Biden tweeted last week: “Last year, there were 21 million unemployment insurance claims before the Thanksgiving holiday. Today, there were 2.4 million. It’s historic progress.”
Facts First: Biden left out key context here. His numbers were correct, taken straight from newly released Department of Labor data about the week that ended on November 6. However, in portraying this decline in unemployment claims as an unqualified success story, he didn’t mention that a significant percentage of the decline happened not because of economic improvement but because the federal government’s special pandemic-era unemployment programs expired in early September and about half of state governments ended those programs earlier. When the programs went away, millions of people could no longer make unemployment claims even though they were still not working; some of them eventually got jobs, experts say, but some didn’t. “The tweet is a misleading measure of progress,” said Peter Ganong, an assistant professor of public policy at the University of Chicago.
The pandemic prompted a major federal expansion of unemployment benefits that started in 2020, including new programs to cover people who had run out of their normal state benefits and to cover those who would not normally be eligible, such as independent contractors and the self-employed. But these pandemic-era programs expired on September 6, 2021 — and even before that, governors in 26 states, 25 of them Republicans, decided to end at least some of the programs early. (As CNN’s Tami Luhby reported, courts forced two of these states to preserve the programs until early September.)
It’s tricky to pinpoint what percentage of the decline Biden touted is attributable to the ending of the special programs, but it’s clear that the percentage is substantial. Andrew Stettner, a senior fellow at The Century Foundation, a progressive think tank that has closely tracked the impact of the pandemic-era programs, and Aaron Sojourner, a labor economist and associate professor at the University of Minnesota, said Thursday that just under a third of the total decline over the past year — about 5.4 million of the decline of about 18.4 million — can be attributed to workers being cut off of state and federal aid, not people finding jobs
The White House official said the labor market is undoubtedly stronger today than it was at this time in 2020. No question — but Biden said something more specific.
The number of small businesses
Biden said in the economic speech on Wednesday: “The number of small businesses is up 30% compared to before the pandemic.”
Facts First: There is no basis for Biden’s claim; Ray Keating, chief economist at the Small Business & Entrepreneurship Council advocacy organization, said it is “not correct.” Intentionally or unintentionally, Biden was inaccurately describing a statistic he had explained somewhat better — though still not precisely — in a speech last week. The statistic is actually about a certain group of business applications for tax identification numbers; it is an indicator of new entrepreneurship, but it says nothing about the number of small businesses that already existed in the country.
Biden “is confusing the data or not using it correctly. One cannot simply use one set of data as if it is another set of data,” Keating said. “The President’s point should be that it is great that business applications for tax IDs are at record levels. And yes, this will translate into more new businesses, and hopefully that’s happening now and will accelerate. This is a hopeful indicator.”
A White House official said Biden was referring to figures that show a roughly 35% increase this year, compared with 2019, in a subset of of business applications for tax identification numbers. Specifically, the White House official said, the President was talking about applications for entities that are thought to have a high likelihood of turning into businesses with payrolls. So in the speech last week, Biden said, “Americans are starting small businesses at a record rate — up 30% compared to before the pandemic.”
Even this claim was flawed, Keating said, since “these are just applications at this point, not businesses.” Though some of them will certainly become businesses, “we simply don’t know how many have been started.”
Biden’s Wednesday claim was more inaccurate. While there is an ongoing boom in the number of Americans starting their own businesses, and while there were about 4.5 million total new applications for tax IDs in the first 10 months of this year, it’s not true that a roughly 35% increase in new “high likelihood” applications means the country has seen a 30% increase in the total number of small businesses in the country.
Keating said we don’t know how many small businesses there are in the US today, since there is an extended lag time in the official data on this subject. Regardless, Biden’s “30%” claim didn’t take into account the number of small businesses that existed prior to the pandemic — according to the federal Small Business Administration, there were about 32.5 million businesses with fewer than 500 employees in 2018, about 26.5 million businesses with no employees — and didn’t take into account the number of small businesses that have shut down during the pandemic, which is not definitively known.
Keating said, “We need to factor in the businesses that have been lost for a complete picture.”
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