The Pitch: Economic Update for December 19th, 2024
Friends,
This week, President Joe Biden joined Nick Hanauer and David Goldstein for a special episode of Pitchfork Economics.
Biden has been on a press tour to talk about his economic legacy — I talked about his speech on the topic last week, and he also wrote an editorial for the American Prospect this week explaining the thinking behind his economic agenda.
“As president, I fought to write a new economic playbook that builds the economy from the middle out and bottom up, not the top down,” Biden wrote. “I fought to make smart investments in America’s future that put us in the lead globally. I fought to create good jobs that give working families and the middle class a fair shot and the chance to get ahead. I fought to lower costs for consumers and give smaller businesses a fair chance to compete.”
On the podcast, Biden elaborated on what he hopes his legacy will bet. “I think the most important part is making sure that we change the dynamic of how we think we build a stronger economy,” the president explained. “By that I mean, and I know you’ve used the term as well, the stronger the middle class is, the better everybody is. The poor have a way up, and the wealthy still do well.”
“For example,” Biden said, “I had the Treasury Department do a study. When union wages increase, what happens to the rest of the wages? The average person says, ‘it’s going to cost me more money,’ but the truth of the matter is it raises the salaries of everybody.”
Biden laid out the mechanics of his economic plan on the podcast by identifying a $6.4 government investment to build an enormous semiconductor plant. That investment has encouraged Samsung to invest another $40 billion in the manufacturing facility, which is the size of eleven football fields. “It’s a thousand acres. I call it the field of dreams,” Biden explains. “It’s going to generate a lot of economic activity in the greater region.”
Samsung will employ some 17,000 construction workers to build the facility, and will hire another 4,500 people to work in the manufacturing facility once it’s built. But Biden correctly recognizes that those workers will create even more jobs with their consumer demand. “When this sucker is built, guess what? They’re going to be building more drugstores and barbershops, and everything’s going to grow.”
Biden has one more month in office, and then President Trump’s second term begins. Nobody really knows what will happen next. In fact, most of this week’s issue of The Pitch will focus on some of the biggest economic questions we’re facing in 2025.
But it’s important at this moment to acknowledge the fact that President Biden has done something monumental in his term in office: He’s finally established an alternative to trickle-down economics in the national conversation. For four decades, virtually every elected leader on both sides of the aisle bought into the fallacious belief that the wealthiest people in America were the true job creators in our economy, and they centered the wealthiest one percent in the vast majority of their policies.
Joe Biden was certainly the first president since Reagan was inaugurated to reorient the direction of those investments, choosing instead to invest in American workers. And those investments worked. Compare America’s lightning-fast economic recovery from the pandemic to our glacially paced, decade-long recovery from the Great Recession and you’ll see the power of investing in the American people as opposed to the Obama Administration’s investments in corporations and the super-rich. Biden understands that you and I are the true job creators in the American economy, not CEOs.
It’s going to be impossible for leaders to put this genie back into the bottle. The American people aren’t likely to accept trickle-down solutions like tax cuts for the wealthy anymore. As I wrote last week, and as Carrie Kaufman wrote in her fantastic newsletter on December 15th, people are sick of playing the rigged game that is American inequality.
Over time, I think President Biden will be remembered for his remarkable contribution to the American economic conversation. He reminded the American people that they’re the real heroes of the economy, not captains of industry and billionaires. And now that they have the vocabulary to describe why trickle-down is wrong and why a middle-out approach is better for everyone, the economic conversation in America has changed forever — and for the better.
The Latest Economic News and Updates
The Richest Man in the World Gives the American People a Government Shutdown for Christmas
In what could be a preview of the chaos of the second Trump term, Elon Musk seems to have scuttled a long-agreed-upon spending bill that would have kept the federal government funded through March of next year.
“If Congress doesn’t extend the deadline, most federal operations would shut down at 12:01 a.m. Saturday, though the effects of a shutdown wouldn’t fully kick in until Monday,” the Washington Post reported yesterday.
This is obviously a fast-moving and volatile situation. But make no mistake: Government shutdowns are expensive and bad for the economy. The Peter G. Peterson Foundation reports that a previous shutdown “disrupted scientific research, services for veterans and seniors, and health and safety inspections by the Food and Drug Administration, the Federal Aviation Administration, and the National Transportation Safety Board, among other programs.” They cause the unemployment rate to go up, and they harm other economic metrics like GDP. If the shutdown proceeds, federal workers won’t get paychecks, which also harms local economies.
There’s plenty of time ahead for more analysis if the shutdown does, in fact, go through, but in general, the rule of thumb to keep in mind is that this kind of uncertainty is bad for America’s economy, and bad for our standing in the international economy. And as we’re about to see in this week’s Pitch, several aspects of the American economy are already quite precarious. If this shutdown does go through, it’s another troubling sign for the American economy in 2025.
What Will the Economy Be Like in 2025?
“After five years of uncertainty and turmoil, the U.S. economy is ending 2024 in arguably its most stable condition since the start of the coronavirus pandemic,” writes Ben Casselman at the New York Times.
“Yet the economic outlook for 2025 is as murky as ever, for one major reason: President-elect Donald J. Trump,” Casselman continues. “He has proposed imposing steep new tariffs and deporting potentially millions of undocumented immigrants, which could lead to higher prices, slower growth or both, according to most economic models.”
The Federal Reserve seems to be responding to that uncertainty. Yesterday, the Fed cut interest rates by a quarter of a percentage point to 4.4%, as expected, but the New York Times notes that “They also forecast two fewer rate cuts in 2025 than they had previously expected.”
“Fed officials predicted that they will cut rates to 3.9 percent in 2025 in fresh economic estimates released Wednesday,” writes Jeanna Smialek at the Times. “They then saw rates coming down to 3.4 percent in 2026, and over the longer term, they thought they would level off at 3 percent — slightly higher than what they had previously expected.”
The Fed seems to believe that inflation will continue to stay above historical levels over the next year or so — and the projected decrease in interest-rate-cuts also suggests that they think the job market will stay steady.
But we are continuing to see signs that Americans on the lower end of the economy are suffering. Case in point: Americans who shop at dollar stores are tightening their belts even further. “customers are waiting to shop for products at the last minute for occasions such as Halloween and spending less toward the end of the month, when their budgets are depleted. Meanwhile, cheap store brands are selling well: Dollar General said in its earnings call on Dec. 5 that its ‘value valley’ aisle offering $1 items was its top-performing category in its last quarter,” reports the Wall Street Journal.
The Journal also reports that Walmart says the “‘inflationary cycle has been really detrimental’ for lower-income families, noting that those customers seem to be under stress. Earlier this week, convenience-store operator Casey’s General Stores said in an earnings call that it is seeing demand softness from lower-income consumers.”
You can find these disparities everywhere you look within the economy. Case in point: Felix Salmon reports that the median net worth of young Americans has reached an all-time high. “For Americans between 25 and 39, median wealth hit $80,500 in 2022,[the Department of the] Treasury calculates — up from just $23,750 in 2010. And that’s in 2023 dollars, after accounting for inflation.”
That’s an impressive gain, but that wealth is not evenly distributed. The Treasury Department specifically spotlighted troubling numbers for young men: “ 61% of men haven’t graduated from college — and their earnings have been declining, in real terms, for 30 years,” Salmon reports. “The proportion of men between 25 and 39 with any job has been falling steadily for more than 30 years. It was almost 95% in 1990. It’s now been below 90% for over a decade.”
Meanwhile, prices are still high and getting higher for everyone at the grocery store. The Producer Price Index, which tracks wholesale prices, is also showing that food prices are climbing again. Courtenay Brown at Axios reports that the highest price increases included “chicken eggs, which rose 55% in November alone. Prices for vegetables, melons, poultry and residential electricity also jumped.”
The media is currently blaming the egg inflation in particular on bird flu, but it’s important to remember that the high egg prices we paid in 2022 and 2023 that were supposedly due to another outbreak of bird flu turned out to be anti-competitive price-gouging by a handful of large egg producers.
As we prepare to enter 2025, we’re looking at an economy that is fundamentally strong with some concerning lingering price pressures, and a growing inequality gap in both wages and wealth. This would make a fine starting point for a new leader with a strong vision to grow the economy from the middle out, but it’s dangerous footing for a president who seems eager to return to the trickle-down economics on steroids that marked his first term in office.
Where Will Labor Go in 2025?
“President-elect Trump lent his support on Thursday to the International Longshoremen’s Association, which represents dockworkers on the East and Gulf Coasts,” writes Peter Eavis at the New York Times. “Contract negotiations between the union and employers have broken down over the use of port machinery that can move cargo without human involvement. The I.L.A. opposes it, believing it reduces jobs, but the employers, mainly large shipping companies, have said that the equipment moves goods more cheaply and efficiently.”
Sociologist Jake Rosenfeld told the Times that he doesn’t think this signals the dawn of a labor-friendly Trump presidency: “I suspect this support is highly selective, and extends only to those unions who have shown some friendliness — or at least neutrality — toward Trump, as is the case with the I.L.A. leadership.”
Remember, Trump recently celebrated Elon Musk’s aversion to unions by praising Musk for firing striking workers who demanded more money — an event that never actually occurred.
In any case, the Trump Administration is about to face a number of high-profile labor actions. “The workers’ union representing more than 10,000 Starbucks baristas said they have authorized a potential strike, ahead of this year’s final round of bargaining talks with the coffee giant on Tuesday,” reports Reuters. “Workers United, which has a bargaining delegation that represents workers at 525 Starbucks stores in the United States, said the coffee giant has yet to bring a comprehensive economic package to the table, while hundreds of legal disputes over unfair labor practices remain unsettled.”
And just today, Amazon delivery drivers walked off the job in seven cities around the nation. The International Brotherhood of Teamsters says thousands of workers are now striking from coast to coast. “The drivers are employees of companies that Amazon uses to deliver packages to customers. Amazon has said it has no obligation to bargain with the drivers because they are not its employees. But the union and the workers said Amazon ultimately controlled their working conditions and was therefore obligated to bargain with them,” reports the New York Times.
And in New Orleans, 600 nurses joined a strike because they say their employers won’t agree to a contract. The nurses share a common problem with those Starbucks baristas and Amazon warehouse workers, and delivery drivers. “For all the attention garnered by the fledgling unions at Starbucks, Trader Joe’s, REI, the New York Times and Amazon, none of them has yet signed contracts that can improve wages and working conditions,” reports Jesse Baum at Capital and Main.
This is the next phase of the “hot labor summer” that erupted all over the nation two years ago. Workers unionized and demanded higher wages, and they’ve been met with endless stalling from employers who are not legally required to sit down and hammer out a contract. Now the workers are forced to call their employers on their bluff with one of the only tools they have — going on strike.
“Pro-labor legislators have attempted to address the issue in recent years. In 2019, the Protecting the Right to Organize Act was first introduced before Congress. The legislation would set deadlines for beginning and ending negotiation,” Baum writes, adding that “the bill passed the House twice, but never passed the Senate.”
It seems unlikely that we’ll see any action toward adopting the PRO Act in the near future, but if these strikes happen, they will raise awareness of the power imbalance that currently exists in the American workplace. And it seems relevant that the American people don’t exactly seem full of positive feelings for CEOs these days.
This Week in Trickle-Down
- Maine’s state legislature passed a paid family leave law that goes into effect in 2026. Republicans are now trying to defund the law with an emergency bill.
- Even though members of his own staff are vigorously protesting them, it still looks like the Trump Administration is planning on going full steam ahead on tariffs when he takes office next year.
- Donald Trump’s Treasury Secretary has outlined his plan to grow the American economy. Unfortunately, it looks like a repackaged trickle-down economic plan to deregulate corporations and slash government spending.
- Silicon Valley executives are trying to convince the Trump Administration to carve out an exception to allow so-called “highly skilled” immigrants to remain in the country. The meatpacking industry is also bracing for the Trump Administration’s policies to negatively impact its workforce — and, related, anyone who claims that those meatpacking employees are not highly skilled should be forced to work one of their shifts and see how they feel at the end.
- Speaking of immigration, the New York Times reports on what happened when one manufacturer tried to stop hiring immigrant workers: “The upheaval caused the company to fall behind on both existing orders and bids for new business, costing it up to $50 million, according to interviews and allegations in an ongoing lawsuit against the staffing agency.”
- The Trump Administration is discussing privatizing the Post Office, which is not as easy as simply signing an executive order. And the USPS is remarkably popular with the American people. “Attempts to privatize one of the most prominent parts of the federal government could spark a political backlash, especially for Republicans representing rural districts that the agency disproportionately serves,” the Washington Post reports.
- The recent discussion about the problems with America’s privatized health insurance system uncovered the horrifying fact that many insurers owned both pharmacies and the pharmacy benefit managers who supposedly exist to help patients find affordable medications. And now a New York Times report shows that the pharmacy benefit manager system helped create the opioid crisis: “For years, the benefit managers, or P.B.M.s, took payments from opioid manufacturers, including Purdue Pharma, in return for not restricting the flow of pills. As tens of thousands of Americans overdosed and died from prescription painkillers, the middlemen collected billions of dollars in payments.”
- PBMs aren’t the only organizations profiting from the pain caused by the opioid epidemic. Private equity investors have taken over the methadone clinic industry and are actively fighting reforms that would help recovering opioid addicts get the kind of care they need.
This Week in Middle-Out
- “The Biden administration granted two requests from California to enforce strict standards for vehicle emissions, including a rule aimed at banning sales of new gas-powered cars by 2035,” reports the Guardian, noting that “Donald Trump is expected to roll back [this move] immediately.”
- “In a first for the reality television industry, the National Labor Relations Board (NLRB) argued on Wednesday that contestants on Netflix’s dating show Love Is Blind should be classified as employees — a designation that would give them significantly more on-set protections, including the ability to unionize,” reports Vox.
- Robert Kuttner has written a great piece about creating housing policies that work for everyone. I especially like his point that good public transportation is also housing policy — people can live further away from urban cores if they have fast, cheap, reliable public transportation to and from their jobs.
Closing Thoughts
This week, the Biden Administration passed a pair of rules that will undeniably improve the lives of the American people. One policy will save working Americans billions of dollars a year, and the other will make it harder for businesses to gouge working Americans who are looking for bargains.
“Today, the Consumer Financial Protection Bureau (CFPB) took action to close an outdated overdraft loophole that exempted overdraft loans from lending laws,” the CFPB reported.
The banking industry has used overdraft fees to wring money out of Americans who are already living paycheck to paycheck. They’ll often stack debit card charges in order to rack up high overdraft fees, thereby extracting the most money possible out of some of the poorest people in the economy.
“The reforms will allow large banks several options to manage their overdraft lending program,” the CFPB writes. “They can choose to charge $5; to offer overdraft as a courtesy by charging a fee that covers no more than costs or losses; or continue to extend profit-generating overdraft loans if they comply with longstanding lending laws, including disclosing any applicable interest rate.”
Capping overdraft fees at $5 is the kind of small and simple regulation that makes a huge difference for people. And that one rule would have huge benefits for working Americans: “The final rule is expected to add up to $5 billion in annual overdraft fee savings to consumers, or $225 per household that pays overdraft fees.”
This regulation comes just a week after news broke that the Trump Administration is seeking to deregulate the financial industry, which could create a whole host of new predatory fees and punishments for working Americans, and less than a month after Elon Musk called to eliminate the CFPB altogether.
And this week, the Federal Trade Commission announced a rule that would require ticketing services and short-term lodging providers to clearly state the total price that consumers will pay upfront, explaining exactly what each fee is for. Too many services advertise low prices to get consumer attention, only to add on significant hidden fees at the very last minute, driving the cost up by a significant percentage.
The FTC’s new rule forces businesses like Ticketmaster and AirBnB to tell consumers exactly how much they’ll be paying after all the fees are included. It’s a simple, straightforward rule that will make the purchasing process more transparent and less frustrating for consumers.
“The final rule does not limit what sellers can charge for a product or service. Instead, it requires businesses to display the total price, including all additional fees, more prominently than other pricing information,” reports Samtntha Delouya at CNN. “The rule was approved with bipartisan support among the commissioners of the FTC. Andrew Ferguson, President-elect Donald Trump’s pick to replace [current FTC head Lina] Khan as FTC chair, was the sole dissenter.”
These two simple changes to everyday occurrences are reminders of the purpose of government: They balance the power between big corporations and working Americans, ensuring that everyone participates fairly in systems of commerce.
That’s what government does at its best: It works as a balance between the rich and powerful and working Americans, in order to make sure that everyone on both sides of the transaction gets what they want, as opposed to the free-market trickle-down system that allows corporations to suck every last dollar out of the wallets of working Americans.
It couldn’t be clearer: When trickle-downers have their way, everyone but a tiny handful of wealthy people loses. When middle-outers write the laws, everybody wins.
Onward and upward,
Zach
Imagining the Economy of 2025 was originally published in Civic Skunk Works on Medium, where people are continuing the conversation by highlighting and responding to this story.