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President Biden gives remarks at the annual Friends of Ireland Luncheon at the Capitol in Washington, D.C., on Friday, March 17, 2023
The Consumer Price Index data released on Wednesday suggests that inflation is continuing to slow: Prices increased 5 percent year over year last month, the smallest increase since May 2021, and just 0.1 percent from last month.
This is ostensibly a welcome reprieve from two years of historically high inflation. But President Joe Biden, whose low approval rating is closely tied to Americans’ pessimism about the economy, shouldn’t breathe a sigh of relief.
As Biden prepares to run for reelection in 2024, the economy is stuck between a rock and a hard place: Overall inflation may be slowing down, but so-called “core inflation” — which strips out volatile food and energy prices — actually rose 0.4 percent from February to March, meaning the Federal Reserve will likely continue raising interest rates, while the American economy teeters on the edge.
That said, the Fed’s efforts to tame inflation and cool off the economy do appear to be working. March’s 5 percent increase in prices marked a deceleration from the prior month’s 6 percent increase. Further, on April 10, the Bureau of Labor Statistics reported that the U.S. added 236,000 jobs in March, a notable drop from the 12-month average of 345,417.
However, overall inflation is still more than double the Federal Reserve’s 2 percent target, and continues to erode Americans’ wages, as March marked the 24th consecutive month of wage decline in the U.S.
Moreover, the Fed’s aggressive actions have unintended consequences. Last month’s collapse of Silicon Valley Bank and Signature Bank — due in part to the Fed’s campaign — will likely trigger a credit crunch, and economists now overwhelmingly predict that a recession will hit the U.S. within the next year, which would be in the middle of the 2024 election cycle.
Throughout the better part of his presidency, the economy has been a major political vulnerability for Biden and will continue to be, despite declining inflation. Biden’s approval rating on the economy is just 37 percent, per the Real Clear Politics polling average, and has been underwater since September 2021.
By the time of the presidential election, Biden could very well have presided over a period of historic inflation, the second and third largest bank collapses in U.S. history, and a recession — which Republicans, absent a compelling economic message of their own, will tirelessly attack him for.
Any effort Biden makes to tout strong economic indicators — i.e., the country’s recovery from COVID-19, and historically low unemployment numbers — will likely ring hollow in the ears of many voters. This is evident when considering findings of a recent Economist/YouGov poll, which showed that only 15 percent of independents, the voters Biden must bring over in order to win reelection, rate the economy as either “excellent” or “good.”
It should be noted that presidents, fair or not, tend to receive praise or blame for economic events that fall mostly outside of their control, and this is no exception. However, Biden has touted his economic accomplishments for virtually his entire time in office — with little success, given his poll numbers — going as far as to say after November’s midterms that there would be no change in his approach to economic policy.
Nevertheless, in the absence of more centrist and consensus-based economic policies, it does not appear likely that Biden’s approach will produce any meaningful improvement in voters’ perceptions of his handling of the economy.
To that end, the president trails both former president, Donald Trump and Florida Gov. Ron DeSantis (R) in hypothetical general election matchups, despite both Trump and DeSantis holding views that fall far outside of the mainstream on a number of other critical issues.
On top of contending with persistent inflation and a potential recession, which tends to occur on average every six or seven years, the president also has to worry about the looming debt ceiling deadline. House Republicans are demanding drastic spending cuts as a starting point to raise the country’s borrowing limit, which the Biden administration and congressional Democrats have rejected.
Biden and Democrats are right from a moral perspective to reject the GOP’s weaponization of the debt limit. Raising the debt ceiling is a matter of the U.S. being able to pay our bills for past spending, including trillions of dollars spent under former President Trump, not setting our future spending.
A default, which will happen if the White House and Congress don’t reach a deal by June, would be unprecedented, and disastrous for the U.S. and the global economy.
House Republicans’ refusal to cooperate on a debt ceiling deal is nothing more than a dangerous game of political chicken designed to sink Biden’s already-low ratings on the economy, and the GOP — not the White House — will ultimately be responsible if the U.S. defaults on its debt.
Yet, in what is probably a harsh reality for the Biden administration, a plurality (37 percent) of Americans, including a majority (53 percent) of independents, would blame both parties equally for a debt default. This underscores the political risks to Biden if a deal is not reached in time, even if Republicans are responsible.
To be sure, Biden is no stranger to these challenging economic circumstances: He was elected vice president at the height of the great financial crisis and also oversaw the negotiations during the 2011 debt ceiling fight, which saw the nation pushed to the brink of default and a downgrade of America’s credit rating.
Fifteen years later, Biden is facing similar problems as president, during what is perhaps the most challenging time for the U.S. economy since the great financial crisis. How he handles this moment will define his presidency, and determine whether or not he sees a second term in the White House.
Douglas E. Schoen is a political consultant who served as an adviser to President Clinton and to the 2020 presidential campaign of Michael Bloomberg. His new book is “The End of Democracy? Russia and China on the Rise and America in Retreat.” Saul Mangel is a senior strategist at Schoen Cooperman Research.
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April 18, 2023 at 12:32AM
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Biden’s economy is stuck between a rock and a hard place - The Hill
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