Strains on U.S. consumer spending such as rising delinquency rates on credit cards largely indicate that Americans’ debt is returning to pre-pandemic levels, the head of President Joe Biden’s council of economic advisers said.
Jared Bernstein, a key advocate for Biden’s economic agenda as the president seeks a second term in 2024, cited wealth gains, job market strength and rising real wages in 2023 as evidence that the U.S. is moving forward from an inflation surge that has depressed Biden’s approval ratings.
At the same time, consumer debt has risen as pandemic-era stimulus programs fade. Credit card balances in the U.S. increased by about 4.7% to $48 billion in the third quarter, pushing the total to $1.08 trillion, according to New York Federal Reserve data — the highest total in data going back to 2003.
“Some of what you’re calling ballooning is really a return to kind of normal levels of credit card delinquencies or debt levels,” Bernstein said on Fox News Sunday. “But if you actually look at how much it costs people to service their debt, even as interest rates have gone up, they’re in quite good shape.”
A 3.7% rise in disposable income over the past year is “one of the tailwinds that’s helping to support consumer spending,” he said.
With inflation in retreat, economists are increasingly betting that the Fed is done with interest-rate increase and will cut borrowing costs next year. A University of Michigan consumer sentiment survey rose to a five-month high in December, and Americans are more optimistic about the outlook for inflation than they have been since 2021.
It’s the kind of data the White House is counting on to persuade voters of Biden’s stewardship of the economy. Asked about Biden’s agenda for 2024, Bernstein said: “I’ve got two words for you: lowering costs.”
That means continuing to “build on the progress we’ve made” to lower costs for items such as insulin, prescription drugs and health care as well as curbing so-called junk fees that Americans pay on everything from concerts to banks, he said.
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