Jeffrey Sonnenfeld

Steven Tian

Cynics often know the price of everything but the value of nothing. Remember how, just months ago, leading economic voices were predicting a catastrophic “Category 5 <a href="https://www.cnbc.com/2022/06/01/jamie-dimon-says-brace-yourself-for-an-economic-hurricane-caused-by-the-fed-and-ukraine-war.html">economic hurricane</a>” this year? The astounding 2.4% GDP growth revealed this week with plunging inflation, historically low unemployment, and corporate profit reports soaring past expectations have knocked the wind out of the fact-free cynics. It’s been said that cynics sound smarter than optimists because of the facts they cite but, in this case, they have no facts.<div class="paywall-selector"></div><div class="paywall">



Some economic experts like former Dallas Fed President Richard Fisher blamed high employment and wages for inflation. Minneapolis Fed President Neel Kashkari similarly insisted that as long as the unemployment rate remains at record lows, “we are not done yet, we need to bring the labor market back into balance.” Many echoed former Treasury Secretary Larry Summers’ ridiculous calls for 5% unemployment for five years or 10% unemployment for a year as a cure for inflation.



These economic wizards forgot that the theoretical basis for their superstations, the Phillips Curve, had been discarded by scholars 40 years ago when these people were students, as even once <a href="https://www.cnbc.com/2019/07/11/the-fed-chairman-says-the-relationship-between-inflation-and-unemployment-is-gone.html">acknowledged by Federal Reserve Chairman Jay Powel</a>l. Now, reality has taken these obsolete economic voices back to school.



The U.S. economy is now pulling off what all these experts said was impossible: strong growth and record employment amidst plummeting inflation. And just as importantly, thanks to Bidenomics, the fruits of economic prosperity are inclusive and broad-based, amidst a renaissance in American manufacturing, investment, and productivity. &nbsp;



Consider some of the headline economic statistics released the last few days, on top of the GDP release. At 3%, inflation is now at <a href="https://www.wsj.com/articles/consumer-price-index-report-june-inflation-ede7f4b1">its lowest</a> since the pandemic, down from its peak of nearly 10% of last year. Commodity prices have <a href="https://www.dw.com/en/global-recession-could-be-stoked-by-falling-commodity-prices/a-65863457#:~:text=Global%20commodity%20prices%20have%20been,recession%2C%22%20Kose%20told%20DW.">plummeted</a> by at least 50% across the board, ranging from energy, food, agriculture, and metals. Some such as lumber are down a stunning 95% in a year. Even gasoline prices, which have ticked up slightly in the last few weeks, are <a href="https://www.forbes.com/sites/dereksaul/2023/07/12/inflation-hits-2-year-low-heres-what-increased-in-price--and-got-cheaper/?sh=78276cc563aa">now lower</a> than pre-Ukraine conflict levels.



Meanwhile, the unemployment rate of 3.7% is at a 54-year <a href="https://www.commerce.gov/news/blog/2023/02/news-unemployment-its-lowest-level-54-years">low</a>, and the unemployment rate has stayed below 4% for the longest stretch in the last 50 years despite the Fed raising interest rates from 0 to 5.5% in a year. The last time this nation saw such good employment news, LBJ was the President and Bonanza was the top show on TV. In almost every major sector, real wages are now growing faster than pre-pandemic <a href="https://twitter.com/AsstSecEcon/status/1679451704050286594">with record workforce participation</a>, <a href="https://www.whitehouse.gov/cea/written-materials/2023/04/17/the-labor-supply-rebound-from-the-pandemic/">amidst millions</a> of new and returning workers–partially thanks to the workforce training, education, and childcare policies that are core pillars of Bidenomics.



The strength of our economic recovery is not just reflected in the headline statistics. In the private sector, corporate earnings calls this last month have resulted in many major companies across sectors beating their expectations by a healthy margin, and many CEOs are raising financial guidance for the rest of the year due to the stronger-than-expected economy.



These include leading technology companies such as Meta, <a href="https://fortune.com/company/microsoft/" target="_blank">Microsoft</a>, <a href="https://fortune.com/company/alphabet/" target="_blank">Google</a>, and Intel; manufacturing companies such as <a href="https://fortune.com/company/boeing/" target="_blank">Boeing</a>, GE, and General Motors; retail/restaurant companies such as <a href="https://fortune.com/company/coca-cola/" target="_blank">Coca-Cola</a>, McDonald’s, <a href="https://fortune.com/company/mattel/" target="_blank">Mattel</a>, and Domino’s; services companies such as <a href="https://fortune.com/company/union-pacific/" target="_blank">Union Pacific</a>, AT&amp;T, <a href="https://fortune.com/company/hilton-worldwide-holdings/" target="_blank">Hilton</a>, <a href="https://fortune.com/company/visa/" target="_blank">Visa</a>, <a href="https://fortune.com/company/mastercard/" target="_blank">Mastercard</a>, and Comcast; to name just a few–an incredibly broad-based outperformance.



No wonder markets are exuberant, with the S&amp;P 500 up 20% on the year and the <a href="https://fortune.com/company/nasdaq/" target="_blank">Nasdaq</a> index up by nearly 50%. Consumer confidence <a href="https://apnews.com/article/economy-consumer-confidence-inflation-interest-rates-567ac06e3d904967ab76b429ca777b00">has jumped</a> 70% to a two-year high. Small and new businesses are sharing in the recovery. We are <a href="https://twitter.com/WHCOS/status/1683857620761812993">seeing record levels</a> of new business creation in U.S. history, with new business applications under President Biden over 50% more than what they were during the Trump years–and with these new businesses hiring nearly <a href="https://eig.org/2023-business-formation-midyear/">40% more workers</a>.



<h2 class="wp-block-heading">How has the economy proven so resilient?</h2>



The credit for this stunning economic recovery surely does not belong to the Fed, which intends to resume interest rate hikes with Chair Powell misguidedly <a href="https://www.barrons.com/livecoverage/fed-july-meeting-decision-rate-hike-powell-speech-today">complaining</a> about a “tight” labor market despite falling inflation. In fact, the Fed has caused some of the most significant price increases, for example in housing, since people no longer want to sell their existing houses with such high interest rates.



The answer is that Bidenomics is proving to be the most impactful and transformative public investment program since FDR’s New Deal, with even <a href="https://fortune.com/company/morgan-stanley/" target="_blank">Morgan Stanley</a> acknowledging that economists <a href="https://yale.box.com/s/0qwc0ehzorwtfvud7rh8r3fryjaeb6b7">broadly underestimated</a> the positive effect of Bidenomics. &nbsp;



Despite continued cries from Larry Summers that Bidenomics is “<a href="https://www.cnn.com/2023/07/26/business/larry-summers-biden-inflation/index.html">dangerous</a>” (strangely thinking that the fortification of domestic supply chains in pharmaceuticals, chips, and other manufacturing is somehow bad for U.S. national interests), all the evidence suggests these complaints are nothing other than stubborn outdated dogma. The impact of legislative accomplishments is already working its way into the economy. The $1.2 trillion Infrastructure and Jobs Act is creating <a href="https://cew.georgetown.edu/cew-reports/infrastructure/">15 million new jobs</a> across all 50 states, with 80% of those jobs requiring <a href="https://www.whitehouse.gov/invest/?utm_source=invest.gov">no more than</a> a high school diploma (not even including secondary downstream jobs such as in offices and retail services).



Furthermore, the Infrastructure Act prioritizes <a href="https://www.gao.gov/products/105519">buy-in-America sourcing</a>, as well as union workers, further bringing well-paying industrial and manufacturing jobs back to America. The $738 billion Inflation Reduction Act is not only lowering costs for healthcare and energy but also investing $391 billion in clean energy technologies which will create millions of jobs across every geographic region. And the $500 billion CHIPS Act is securing and reshoring sensitive U.S. technological supply chains where we rely on East <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/08/09/fact-sheet-chips-and-science-act-will-lower-costs-create-jobs-strengthen-supply-chains-and-counter-china/">Asia for 75% of</a> our chip supply and has catalyzed another $300 billion in <a href="https://www.whitehouse.gov/invest/?utm_source=invest.gov">private sector investment</a> across dozens of new domestic semiconductor foundries.



<h2 class="wp-block-heading">Bi-partisan support post-passage</h2>



As impactful as they already are, these investments are just beginning to pay dividends and will continue to do so for decades to come. Of course, <a href="https://www.cnn.com/2022/09/09/politics/biden-republicans-infrastructure-law/index.html">top GOP voices</a>, including over 20 Republican legislators ranging from Senator Tommy Tuberville of Alabama; Rep. Steve Scalise of Louisiana, Rep. Kay Granger of Texas, Rep. Rob Wittman of Virginia, and Rep. Ken Calvert of California now claim credit, celebrating these very programs they voted against.



The Biden Administration ought to be more forceful in communicating the success of Bidenomics. The cabinet is technically competent and honest–but they are also their own worst critics. Especially on the economic policy side, Biden’s chronically humble advisers are leaving room for false narratives to proliferate and letting cynical provocateurs distort reality.



We also wish the Biden Administration would make it easier to find and see the impact of their transformative public investments–as their much-ballyhooed “invest.gov” webpage seems to be filled with technical errors and non-existent landing links. But claiming credit does not seem to come naturally to these brilliant policy wonks.



The song&nbsp;Happy Days Are Here Again&nbsp;was the anthem for FDR’s 1932 campaign and helped launch FDR’s New Deal economic recovery programs. These programs helped take the U.S. out of the Great Depression with massive government temporary stimulus programs such as the WPA and CCC, as well as lasting initiatives such as the SEC, the FDIC, the TVA, and the FHA. These programs came to the rescue of a nation with a quarter of the workforce unemployed, but it took eight years and a World War to bring about economic recovery.



Incredibly, the array of Bidenomics economic recovery programs have enjoyed far greater bipartisan support than FDR’s at the time and took only three years to enact. New legislation such as the CHIPS Act, the Infrastructure and Jobs Act, and the Inflation Reduction Act, are just beginning to pay back–and enjoying remarkably rare bi-partisan post-passage legislative pride, regardless of how legislators actually voted. Happy days are truly here again!



Jeffrey Sonnenfeld is the Lester Crown Professor in Management Practice and Senior Associate Dean at Yale School of Management. He was named “Management Professor of the Year” by Poets &amp; Quants magazine.



Steven Tian is the director of research at the Yale Chief Executive Leadership Institute and a former quantitative investment analyst with the Rockefeller Family Office.&nbsp;



The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of&nbsp;Fortune.



<h2 class="wp-block-heading" id="block-a9c15eee-292b-44aa-9217-08f3279fafcf">More must-read&nbsp;<a href="https://fortune.com/section/commentary/">commentary</a>&nbsp;published by&nbsp;Fortune:</h2>



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<li><a href="https://fortune.com/2023/07/03/the-global-economy-is-due-for-a-reality-check-warns-the-central-banks-bank/">‘The global economy is due for a reality check,’</a>&nbsp;warns the central banks‘ bank</li>



<li>Demand for urban real estate will be challenged for the rest of the decade. Here’s&nbsp;<a href="https://fortune.com/2023/07/20/demand-for-urban-real-estate-will-be-challenged-for-the-rest-of-the-decade-heres-how-the-worlds-superstar-cities-are-projected-to-fare/">how the world’s superstar cities are projected to fare by 2030</a></li>



<li><a href="https://fortune.com/2023/07/11/the-feckless-400-these-companies-are-still-doing-business-in-russia-funding-putins-war-sonnenfeld-tian/">‘The Feckless 400’</a>: These companies are still doing business in Russia–and funding Putin’s war</li>



<li>Great Place To Work CEO: ‘It’s time to acknowledge&nbsp;<a href="https://fortune.com/2023/07/12/great-place-work-ceo-affirmative-action-acknowledge-diversity-makes-us-uncomfortable-supreme-court-michael-bush/">why diversity makes us uncomfortable</a>’</li>
</ul></div>

How has the U.S. economy proven so resilient? Partly due to Bidenomics, write Yale's Sonnenfeld and Tian.

Bidenomics’ critics are being proven wrong. Happy days are here again

The 50 companies most likely to thrive, 5 investing trends for 2025, and more. Read the latest edition of <a href="https://fortune.com/packages/december-2024-january-2025/?&itm_source=fortune&itm_medium=article_tout&itm_campaign=DecJanMag">the magazine.</a>

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