The party seems stuck in a dangerous political position, insisting the economy is doing well while voters believe it’s in the tank.
The CNN poll, conducted April 28-May 1 by SSRS, showed a majority of Americans think Biden’s policies have hurt the economy, while 8 in 10 say the government isn’t doing enough to fight inflation. It was released on the same day that the Federal Reserve made its biggest move against the rising cost of living in 22 years. The central bank raised interest rates by half a percentage point, but sparked a rally in stocks by indicating that despite imminent adjustments, it did not expect further massive increases in credit prices.
“I would like to take this opportunity to speak directly to the American people,” Federal Reserve Chair Jerome Powell said at the start of a news conference. “Inflation is far too high and we understand the difficulties it causes.
Yet the strikingly direct moment fails to allay concerns that the Fed and White House have acted too slowly to fight inflation, are not using aggressive enough methods to alleviate it, and may still be influenced by global factors, including war in Ukraine and its aftermath, being overtaken by the Covid-19 pandemic, which clogged supply chains, sent energy prices skyrocketing and sparked other rising prices.
What the rate hike means
The rate hike will make new home and car loans and payments on credit card balances more expensive. But in the process it could cool the housing market, make it easier to buy a home and take the heat out of rising prices.
Justin Wolfers, an economics professor at the University of Michigan, explained that Americans could see the results of rate hikes in their daily lives as inflation simmers at its highest level since Ronald Reagan’s presidency in the 1980s.
“What the Fed is hoping to do is cool inflation a bit so your paycheck goes a little further, although that will mean a slowdown in the economy and potentially a little less bargaining power for workers and less prospect of a pay rise any time soon.” ‘ Wolfers said on CNN’s Newsroom.
The White House is showing clear signs of frustration as inflation overshadows the strong aspects of an economy that appears in remarkably resilient shape amid the catastrophe of a two-year pandemic and despite a small 1.4% contraction in the first quarter of Europe’s worst war since 1945.
Biden, for example, on Wednesday announced cuts to the federal budget deficit and an unemployment rate nearing a 50-year low in what appeared to be an attempt to preempt the Fed’s announcement and signal determination.
However, his political plight underscores why inflation remains a force feared by political leaders everywhere.
Despite claims by Republicans in campaign ads that Biden’s public spending policies are the only source of inflation, the president is correct in identifying external factors, including the pandemic and the war in Ukraine, as the main drivers of rising prices.
But the reality doesn’t mean voters will give Biden a pass. It’s in the nature of the job that when the country is in a bad mood, the president gets the blame. And if the White House’s efforts to explain and fix the problems have sometimes been muddled and late, the political damage mounts. Biden may never shake the original White House line that high inflation was a “temporary” phase emerging from the pandemic. And while the economy is strong in many areas, politically, voter perception is often more important than the data that tells the real story.
A disheartening poll for the White House
The CNN poll, for example, says only 23% of Americans think the economy is doing reasonably well, down from 37% in December. The last time public perception of the economy was this bad in CNN polls was in November 2011. Only 34% agree with Biden’s management of the economy. And his approval ratings for support of the middle class – 36% – are staggering for a president who has made the issue the foundation of his political career.
The survey also confirms the question of public perception of the true state of the economy. Americans, almost 4 to 1, said they were more likely to hear bad news than good news about the economy.
Around 94% of Republicans rate the economic situation as bad. This suggests that views about the economy can be as influenced by partisan leanings as by a neutral assessment of conditions. Conservative news outlets keep a constant drumbeat of horror stories about rising prices, and Republicans have turned the issue into an effective campaign tool while hailing the strength of ex-President Donald Trump’s economic performance.
But 81% of independents and 54% of Democrats also think the economy is bad, suggesting Biden has taken a hit from some of the voters who put him in office.
Americans are more positive about their own finances than about the national economy, with 53% saying they are satisfied with their personal financial situation. This, in turn, could suggest that a broader sense of malaise is influencing views about the economy. Still, that number has fallen from 66% in 2016.
Given that somber catalogue, Biden’s tone and subject matter came as a bit of a surprise on Wednesday.
He claimed credit for reducing the federal deficit by $1.5 trillion by the end of the year. This is akin to the waste of the debt-ridden Trump years and exposes the hypocrisy of Republican deficit hawks who forget their supposed principles when one of their own is in the Oval Office.
Yet how many Americans, stretching their weekly budgets, care so much about deficits — even when, as Biden said, cutting deficits could lower inflation in the long run?
The White House event also revealed the President’s frustration at not recognizing what’s good about the economy.
When a reporter asked him about Ukraine and the Supreme Court’s abortion drama, he replied, “No one asked about deficits, right? … You want to make sure that doesn’t get exposed.”
What happens next
The best hope for Biden, other Democratic politicians, and all Americans facing an economic crisis is that the Fed’s approach works and prices fall. And here’s a perspective: The economy is not facing the full-blown disaster of 2008, or even the inflationary nightmares of 40 years ago.
“I don’t think we have the economy of the 1980’s or the 1970’s,” Betsey Stevenson, who was a member of President Barack Obama’s Council of Economic Advisors, said in “The Lead with Jake Tapper” on Wednesday.
But it’s hard to see things getting better anytime soon — or near the time for Biden to make a difference ahead of the midterms.
Even if the war in Ukraine ends soon, the fundamental changes it has unleashed in the global economy will last for years. More pressure on food prices is sure to come if the harvest in Europe’s granary – a major source of grain and sunflower oil – is disrupted by the war. New Covid-19 lockdowns in China could reignite the supply chain chaos that has helped fuel inflation in the first place. Some observers think the Fed has moved too slowly. Others believe their attack on inflation will trigger a recession.
Jamie Dimon, CEO of JPMorgan Chase, told Bloomberg TV Wednesday ahead of the Fed’s announcement that while the economy is strong and consumers are in good shape, there are weaknesses everywhere. For example, he sees a 1 in 3 chance of a “mild recession” spanning six to nine months, but cautioned that “there’s a chance it will be much more difficult.”
So there will be even more frustration for the country, and for Biden in particular.
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