A preview of the economic backdrop for this year's State of the Union address

Transcript

LEILA FADEL, HOST:

President Biden's State of the Union address tonight will likely cover a lot of ground - the suspected Chinese spy balloon, the war in Ukraine, the epidemic of gun violence. But what might the president have to say about the state of the American economy? For that, we turn, as we often do, to David Wessel. He's director of the Hutchins Center at the Brookings Institution. David, welcome.

DAVID WESSEL: Good morning, Leila.

FADEL: Good morning. So what's the economic backdrop for this year's State of the Union?

WESSEL: Well, President Biden has a lot to brag about, and he probably will. The economy is recovering from the COVID shock. Unemployment is at a 50-year low. He'll observe, as he has recently, that the U.S. has created 12 million jobs since he took office. That's a lot of jobs.

FADEL: Yeah.

WESSEL: Inflation is still too high, but he can accurately say that it's starting to come down. But I think he faces two big challenges. One is that public opinion polls show that Americans are in a really bad mood. It's not all about the economy, but some of it is. Food prices up 12% over the last year. Electric bills up 14%. For many people, wage increases haven't kept up with rising prices. And for people lucky enough to have 401(k) retirement plans, they're down. So no president can make people feel better about the economy by reciting a lot of economic statistics. Second, I think the economy is likely to slow this year. Now, the odds of the soft landing where inflation comes down without a recession are probably better than they were a few months ago, but it's far from a sure thing. So the president needs to avoid the declaring mission accomplished mistake and then having words thrown in his face later this year if unemployment goes up.

FADEL: Now, this year's State of the Union is broadcast across the country, as it always is, and it's seen by many as the opening of the president's likely reelection campaign message. What do you think that message will be?

WESSEL: Well, one big message on the economy will be to remind Americans just how much Congress did in the past couple of years. I wasn't surprised that a recent Washington Post-ABC poll found that 93% of Republicans think the president has accomplished little or nothing. But 22% of Democrats and 66% of independents think that. He'll want to reach them. So he's going to talk about the bipartisan infrastructure bill - half a trillion dollars - and about all the tunnels and bridges that'll be fixed. He'll talk about the CHIPS Act, which is a way to protect our technological edge over China. A future made in America is the White House slogan. And he's going to talk about all those climate provisions in the so-called Inflation Reduction Act. Now, it'll take a long time for these jobs to actually show up in the economy, but he'll want to make people know that those jobs are coming.

FADEL: And the debt ceiling?

WESSEL: Oh, we can't get away from that. So the president's going to say that the credit of the United States government should never be questioned. Congress should raise the debt ceiling - no negotiation over that, period. But he's going to say that Democrats and Republicans have different spending priorities and need to find common ground. He'll say, I'm going to issue my budget in early March. You should issue yours, he'll say to House Republicans. It's going to be hard for them to come up with a budget that does real damage to the deficit since Speaker McCarthy has taken Social Security, Medicare, taxes and probably defense off the table.

FADEL: Besides spending and taxes, what other economic policies is the president likely to emphasize?

WESSEL: Well, this administration has taken a lot of steps to increase competition in the economy - its aggressiveness on antitrust, the move to allow hearing aids to be sold over-the-counter, the proposed ban on noncompete clauses in labor contracts, the requirement that airlines and hotels disclose up front all the extra fees they charge. So I think he's going to emphasize that to appear to the - to talk about how he's making the economy better.

FADEL: That's David Wessel from the Brookings Institution. Thank you, David.

WESSEL: You're welcome. Transcript provided by NPR, Copyright NPR.