The US Middle Class’s Economic Anxiety Will Decide the 2024 Election

By Shawn Donnan, Claire Ballentine, Alexandre Tanzi and Christopher Cannon

July 5, 2023, 5:00 AM EDT

Joe Biden is obsessed with the American middle class. It’s the very spine of the US economy, as the president regularly puts it, and the deliberate target of everything from his administration’s efforts to rewrite economic policy and seed an industrial revival to its foreign policy and geopolitical competition with China.

The core premise of Bidenomics is that the middle shall come first.

“Bidenomics is about building an economy from the middle out and the bottom up, not the top down,” Biden said in a Chicago speech last week, laying out his vision of a boom fueled by a surge in government investment.

Yet as he gears up his 2024 reelection campaign for a vote that’s now less than 18 months away, the president has a middle-class problem. Among the 100 million Americans with annual incomes between $45,000 and $180,000 and wealth between $100,000 and $1 million, polling commissioned by Bloomberg News shows persistent angst about the future.

The post-pandemic surge in inflation and the Federal Reserve’s reaction — the fastest increase in interest rates since the 1980s — have combined to put the middle class in a financial vice grip. They pay more for everything — food, homes, cars, energy — while the end of the easy-money era means loans, too, are more costly.

The bottom line: More than $2 trillion in wealth held by the middle class has been eliminated since the Fed started hiking, according to data compiled by economists at the University of California, Berkeley.

And just 39% of those 100 million Americans defined as middle class say they expect their situation to get better in the next year, according to a Harris Poll taken for Bloomberg at the end of March and again in June. The margin of error was plus or minus 3.5%.

That’s a slight improvement from October, when only 35% answered the same question optimistically. But for Biden, it may get worse.

Many economists still expect a recession before the election. A moratorium on student-loan repayments is ending in October, and on Friday the Supreme Court threw out the president’s plan to relieve as much as $20,000 in student loans per borrower.

White House officials argue that the American middle class is unequivocally better off economically than it was even before the pandemic. They argue that the hit to wealth that began in March 2022, when the Fed started hiking rates, is simply a reflection of the middle class burning off excess savings. Even measuring progress via wealth is difficult given the turmoil of the pandemic.

But they also acknowledge that many middle-class families still feel anxious about the economy.

“People are the best arbiters of their experience and their sentiment. And no one here is trying to tell them anything other than that,” says Jared Bernstein, chair of Biden’s Council of Economic Advisers. “However, what this president has done objectively has turned this economy around, has created opportunities in the job market like we’ve never seen before, and has planted the seeds for a much more inclusive economic future for the middle class.”

In two dozen separate interviews with Bloomberg News, the common theme that emerges from members of the middle class across the political spectrum and the country is a feeling of vulnerability at odds with historic lows in unemployment and other signs of stubborn strength in the economy.

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By his own telling, Ron Davis lives a comfortable life in the suburbs of Minneapolis. The business executive and his wife both drive a Mercedes and bought a Mini for their 21-year-old daughter last year. In 2021 they refinanced their mortgage and what little they owe on the four-bedroom home they bought almost two decades ago to take advantage of historically low interest rates. At age 56, Davis says some savvy investments mean he could afford to retire early if he needed to.

Ron Davis, 56

Location

St. Michael, Minnesota

Occupation

Laid-off business executive

Political party

Conservative-leaning independent

Family status

Married, one daughter

Mortgage

$1,210/month

Other expenses

Tithes 10% of income to church

Ron Davis and his wife Monica at their home in St. Michael, Minnesota. Photographer: Ben Brewer/Bloomberg

But he hasn’t escaped the anxiety. Davis was laid off by tech company GoDaddy Inc. in February, the second time he’d lost his job in the past 18 months. (The first came when hotel chain Radisson in 2021 laid him off from his job running its loyalty program in North and South America as its business collapsed because of the pandemic.)

Davis remains relentlessly upbeat about his own economic situation despite having watched his investments and retirement savings lose a third of their value since the onset of the pandemic.

And yet, all around him, Davis sees signs of his peers teetering.

“That middle class, it feels like that’s where it’s really hurting,” he says.

The recession many economists predict has yet to materialize, and the US economy continues to grow. About 13.1 million more people are employed today than when Biden took office in January 2021.

And from January 2020 until the Fed started raising interest rates, the 100 million Americans defined as middle class enjoyed huge gains. Even after the hit over the past year, the cohort has added $6.7 trillion to their combined wealth since the beginning of 2020, according to data collected by economists at the University of California at Berkeley including Gabriel Zucman, winner of this year’s prestigious Bates Medal for economists under 40.

The problem for Biden is that the wealth boom has ended. Since rates started climbing in March 2022, the inflation-adjusted value of assets held by the middle class has fallen 6%, or $2.4 trillion, according to the Berkeley economists and their realtimeinequality.org tracking tool. On average that equates to a $34,000 hit per middle-class adult.

The squeeze between declining wealth and rising household costs is feeding the apprehension that shows up in polls and fueling a partisan divide.

Just 46% of middle-class Republicans responding to the Harris Poll said their personal financial situation was better than five years ago, when Donald Trump was in the White House, versus 64% of middle-class Democrats. Only 35% of Republicans said they expect things to get better in the next year, compared with 43% of Democrats.

Tammy Pearson, a 56-year-old retired police officer who lives in Granbury, Texas, just outside Fort Worth, has watched her retirement savings lose a quarter of their value in recent years. That, together with rising prices for food and other essentials, has led her to become an energetic bargain shopper.

“I save every bit that I can,” Pearson says.

As a Republican she sees a logical target for her economic woes: Joe Biden.

“It was really scary retiring right after he became president,” Pearson says. “I almost did not retire because I was afraid this was going to happen. My husband said we just need to have faith and hope for the best.”

Tammy Pearson, 56

Location

Granbury, Texas

Occupation

Retired police officer

Political party

Republican

Family status

Married, two children

Property taxes

$8,000/year

College tuition

$15,000/year

Retired police officer Tammy Pearson in Granbury, Texas. Photographer: Kathy Tran/Bloomberg

Much of what’s been lost is paper wealth, whether in declining home values or the daily market swings of retirement savings not destined to be touched for many years. But the nature of the recovery since the pandemic also had other very real and immediate impacts on the budgets of middle-class families.

By the middle of 2022, middle-class households were spending $8,000 more each year than in 2019, before the pandemic — much of it on essentials, like housing, transportation and food, according to a Bloomberg analysis of Bureau of Labor Statistics consumer expenditure data.

For almost 27 million middle-class households in the US, those expenditures also outstripped their salaries, causing them to lean even more on debt and gig work to pay the bills.

Household costs of all kinds have shot up since the pandemic. The average cost to own and operate a new vehicle exceeded $10,000 a year for the first time in 2022, according to the motoring group AAA. Household spending on transportation — including gas — is up 16.5% just in the past year. The monthly mortgage payment on a median-priced home with a 10% down payment is now $2,342 — almost double the cost in early 2021.

Source: Bloomberg analysis of Bureau of Labor Statistics Consumer Expenditure Surveys data

In response to higher costs, homeowners are tapping into their housing wealth more often. Balances on home equity lines of credit rose by $3 billion in the first quarter of 2023, the fourth straight quarter of increases after almost 13 years of declines.

To be a member of the US middle class is also to be a member of an increasingly leveraged class facing higher costs to service debt as interest rates rise. The middle class held $7.8 trillion of the $18.3 trillion in debt owed by US households at the end of 2022. That was $1 trillion more than at the end of 2019.

Mel Mills, a 37-year-old digital strategist from Detroit, has a half-dozen credit cards whose cash-back benefits have become part of his monthly budget reckoning.

Mills says he spends more on groceries and utilities than he ever has. His $960 monthly payment on the $105,000 in student loans he took out to pay for his education is more than he spends on the mortgage for the Detroit house he bought in 2014. He’s watched his retirement savings and other investments slump in value since the onset of the pandemic.

A Black professional living in a Democratic stronghold in a battleground state, he fits a demographic profile that Biden will count on for support in 2024. And yet, Mills is nervous about recent bank failures and the economy.

He’s also joined a growing mass of political independents in the US, in part because he wonders if politicians “are thinking with people like me in mind.” He won’t be voting for either major party’s candidates in the 2024 election, he says, though he hasn’t chosen an alternative yet.

“The Republican and Democratic parties swing hard on one extreme or another,” Mills says. “We need someone who is more centrist and moderate.”

Mel Mills, 37

Location

Detroit suburbs

Occupation

Digital strategist

Political party

Independent

Family status

Single

Mortgage

$520/month

Student loan payment

$960/month ($105K total student debt)

Mel Mills works in Digital Communications for Wayne State University in Detroit, Michigan. Photographer: Emily Elconin/Bloomberg

Biden’s best economic argument for reelection to date is the remarkable recovery in jobs from the 2020 carnage caused by the initial wave of the pandemic. The gains have continued into 2023, with the US adding 339,000 jobs in May, according to official data.

A recession would mar that record. Even a relatively modest 1% rise in the unemployment rate would mean 1.6 million Americans losing their jobs. In the fields of tech, finance and most recently, manufacturing, the layoffs have already begun, with white-collar middle-class workers feeling the pain.

After 40 years working in finance, Lori Blumstein was caught by surprise when she lost her job in the mortgage industry last August. The Fed’s rate hikes hit the property market, and a pandemic mortgage boom turned into a bust that forced her into retirement.

Blumstein, 64, went from living on a salary just shy of $100,000 a year to making ends meet on $1,918 per month in Social Security. That led to a rapid campaign to rein in costs and preserve her retirement savings. She sold a three-bedroom house in rural Eustis, Florida, and moved into a one-bedroom condo in Fort Lauderdale on which she has a small mortgage.

Lori Blumstein, 64

Location

Fort Lauderdale, Florida

Occupation

Laid-off from mortgage industry

Income from Social Security

$1,918/month

Mortgage

$940/month

Groceries

$200/month

Car insurance

$105/month

Lori Blumstein at her home in Sunrise, Florida where she recently relocated to be closer to family. Photographer: Scott McIntyre/Bloomberg

Blumstein is a Democrat and plans to vote for Biden in 2024 — in part because she says she can survive on Social Security and what she has saved. She has two cruises planned this year.

The pandemic brought a wave of Baby Boomer retirements that has hung over the US labor market and contributed to worker shortages and inflation. Those are often portrayed by economists as voluntary exits from the workforce. And yet Blumstein is a reluctant middle-class retiree with a grudge counting on something changing in the economy to address it.

“I’m bored. I wasn’t ready to retire,” she says. “Unfortunately, I only know how to do the mortgage business, and it’s still in the toilet right now.”

The good news for Biden and his reelection bid may be that the middle class is proving resilient.

In the Minneapolis suburbs, Davis has found another chapter in his working life thanks to what continues to be a strong US labor market. After a flurry of interviews, he was offered a job as a consultant last month.

And yet the layoffs he’s endured in recent years have left Davis newly familiar with the vulnerability that’s there in the middle class these days, scrambling his politics as well as his view of a corporate America and its executive ranks for which he’s been a loyal foot soldier for decades.

“You know, once you get into those C-suite jobs, it’s not a vocation, it’s a vacation. Because you’re set for life,” Davis says. Meanwhile, every time he looks on LinkedIn it feels like a third of the people in his network are looking for work.

A self-described conservative-leaning independent, Davis says he doesn’t want to vote for either Biden or Trump next year. He’ll wait and see who Republicans nominate. He may vote Libertarian. He may vote for another party. He’d be willing, he says, to look at left-of-center populists in the mold of Senators Bernie Sanders and Elizabeth Warren.

For Biden, that’s a fundamental problem about a year-and-a-half out from the election. He offers a relentlessly optimistic view of the economy and the future of the middle class. And yet the very subjects of his vision say they’re in pain — and that they’re more than a little anxious about what lies ahead.

Additional reporting by Alicia Diaz and Mackenzie Hawkins in Washington

Editor: Margaret Collins

Lead photos: Ben Brewer/Bloomberg; Kathy Tran/Bloomberg; Emily Elconin/Bloomberg; Scott McIntyre/Bloomberg

Harris Poll methodology: This survey was conducted June 16 to June 25, 2023, among 4,109 Americans, with 1,248 respondents identified as being middle-class. Middle-class respondents are defined as having a total household income between $45,000 and $180,000 before taxes and financial assets between $100,000 and $1 million. For this study, the data for this population is accurate to within +/- 2.0 percentage points using a 95% confidence level, and +/- 3.5 percentage points for respondents within the middle-class sample.