Based on Incomes, Americans Are a Lot Better Off Under Biden Than Under Trump

In their only 1980 presidential debate, Ronald Reagan posed a famous question that sealed Jimmy Carter’s political fate: “Are you better off now than you were four years ago?” Bill Clinton similarly denied George H. W. Bush a second term in 1992 by running a campaign based on James Carville’s famous expression, “It’s the economy, stupid.” Donald Trump faces a real challenge coming up with a similarly plausible line in his contest with Joe Biden. Last year, the Democratic president presided over the largest income gains in the 21st century.

I recently showed in the Washington Monthly how Biden easily eclipses Trump in categories such as how much the economy has grown, how much businesses have invested, how much consumers spent after inflation, how many jobs businesses created, and how many new enterprises entrepreneurs started. In every case, Biden’s superior record stands—even if Trump gets a pass for 2020 when the COVID-19 pandemic ravaged the global economy.

However, most voters judge a president’s economic performance by other metrics, namely how much money they’ve earned and how much they can afford to buy with it. Biden easily beats Trump by these metrics as well, too. Focusing on wages and salaries, for example, working Americans earned an average of $3,250 more per year from 2021 to 2023 than from 2017 to 2019, and that’s taking inflation into account.

When voters judge a president on the economy, timing also matters. The severe inflation of Carter’s sole term eroded people’s buying power just as he prepared to campaign for reelection. People forgot that their real incomes per person had jumped 6 percent in 1977 and 1978—until OPEC hiked energy prices, Iran’s revolution cut its oil production, the U.S. stopped importing oil from the country, and the ensuing inflation turned people’s gains into losses. Ironically, Americans were better off in 1980 than four years earlier, but their gains were fading.

Biden’s timing is proving luckier than Carter’s. Adjusted for inflation, per capita incomes increased 3.1 percent in 2021 but fell as inflation overwhelmed increases in people’s wages and salaries in 2022—and then, as inflation receded and employment soared in 2023, real incomes jumped 4.2 percent. Donald Trump, Barack Obama, and George W. Bush never came close to the strong income growth of the last year. To put it in perspective, Americans experienced larger annual income gains only five times in the previous 50 years, including twice under Ronald Reagan, twice under Bill Clinton, and once, very briefly under Trump as his term ended.

In 2020, the mogul’s last year in office, real per capita disposable income jumped 6.4 percent, albeit as growth, jobs, and investment collapsed. That disposable income-growth number is almost certainly why many Americans have rosy memories of the Trump economy. But the economy had nothing to do with the gains in 2020: All of the income growth came from special government transfers for the pandemic, through large checks for 90 percent of households and souped-up unemployment benefits for 30 million Americans who lost jobs.

Before the pandemic, “other” federal transfer payments and jobless support averaged $470 billion per year from 2010 to 2019. In 2020, however, those payments jumped to nearly $1.5 trillion, an increase of $990 billion in one year. If we set aside that stunning largesse, what happened to people’s incomes in 2020 based on the economy and standard government payments? Instead of per capita incomes rising 6.4 percent after inflation, they edged down from $49,423 to $49,376 (2020 dollars). That should be unsurprising given that total wage-and-salary income was static and GDP fell 2.2 percent, the sharpest drop since the Great Depression of the 1930s, except for the Great Recession of 2009.

The same adjustment also reduces real income gains in 2021, Biden’s first year in office, when special government transfers and expanded jobless payments reached more than $1.6 trillion or $1.16 trillion above average levels. But the impact on incomes in 2021 was much less because, unlike in 2020, the economy was strong. In 2021, real GDP grew 5.8 percent, employment increased by 4.1 million jobs, and total wage-and-salary income, after inflation, rose 4.5 percent.

And since we measure how much incomes grow versus the previous year, income gains in 2021 apart from the special pandemic payments should be based on 2020 income also apart from the special payments in that year. I calculated it and found that after adjusting for inflation, American incomes per capita increased by 2.5 percent in 2021, rather than the 3.1 percent rate that includes the special transfer payments and jobless support. In 2021 dollars, real personal income per American increased $1,163 in 2021 from $51,499 to $52,662.

In 2022, real incomes declined 5.9 percent as inflation jumped to 6.1 percent, but that income falloff wasn’t because the economy slowed. It’s because most of the reported fall in per capita income came from a sudden $900 billion reduction in those pandemic-related special government transfer payments. Adjusted for inflation, the remaining transfer payments in 2022 were less than the pre-pandemic average, and federal jobless support fell to $22.3 billion, the lowest level after inflation in more than 50 years.

At the same time, the economy added 6.3 million new jobs in 2022, increasing wage-and-salary income after inflation by $174 billion. The year’s high inflation did outrun the otherwise healthy per capita income gains, but by much less than reported: Focusing on what happened to people’s incomes based on the economy, real income per capita declined 1.9 percent, from $55,878 to $54,798 (2022 dollars). Notably, that decline was less than the previous year’s gains.

That brings us to 2023, when the official data showed that Americans’ per capita incomes, after inflation, jumped 4.2 percent. The special transfer payments continued to fall substantially below those before the pandemic, and federal unemployment payments edged to $22 billion, the lowest level since 1969, adjusted for inflation. With transfer payments and jobless benefits no longer distorting incomes, the official report accurately reflects what happened to Americans’ real disposable incomes based on the economy.

It’s hard to overstate the extraordinary growth of incomes during the Biden Boom of 2023. No president since Richard Nixon has presided over average annual income gains as significant as the 4.2-percent increase in 2023 under Biden.

Now that the 2024 presidential campaign primaries are well underway, the broader record also shows that Biden clearly beats Trump based on wages and salaries per working American and all income per person, including transfer payments, capital gains, and other financial gains. One reason for this boon is that millions more people are employed under Biden: An annual average of 151.7 million Americans held jobs from 2021 to 2023, versus 147.1 million under Trump from 2017 to 2019.

The other reason is the higher wages and salaries under Biden. If we take wage-and-salary income per year from 2021 to 2023, divided by the average number of people working each year, the result in 2023 dollars is an average annual wage-and-salary income of $76,142 per working person. That’s $3,250 more than the average of $72,892 under Trump from 2017 to 2019—again, after inflation.

If the economic issue in the upcoming election is how much Americans earn, it’s clear that Americans have been much better off under Biden than they were under Trump.

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