The measure marks a major turning point for Biden after two years of battling rising inflation and allegations that his agenda contributed to the woes. But it’s only the latest in a string of economic developments that have boosted the government’s confidence that it can put the US on a glide path without first plunging it into a downturn.
“Despite repeated forecasts that a recession is imminent, the US recovery is solid,” said Lael Brainard, director of the National Economic Council, in a speech at the Economic Club of New York shortly after the inflation data was released on Wednesday. “Economy is resisting projections that inflation would not fall without significant job destruction.”
But even as fears of a devastating recession recede, Biden and his allies are already turning their attention to a number of minor roadblocks that threaten to dampen the White House policy narrative. Fears linger in the ranks that a full economic triumph could lead to political unrest later – and that the government lacks the resources to deal with a serious backlash should it come before the elections in 16 months such come.
“At this point, good news is good news for the White House,” said Tobin Marcus, a former Biden economic adviser. “That doesn’t rule out the possibility that it will actually be more difficult than hoped for.”
The government is gearing up for the en masse resumption of student loan payments this fall, which could trigger a financial shock to millions of households who have benefited from the three-year grace period. Meanwhile, Republicans in Congress are already signaling plans for a budget fight that is likely to overthrow the administration and further shake the country’s political stability. And then there’s the Federal Reserve, which remains committed to raising interest rates to bring inflation down to 2 percent, despite warning that doing so could eventually plunge the US into a recession.
“Are we going to sacrifice the economy to the altar of 2 percent inflation?” Mark Zandi, chief economist at Moody’s Analytics, said earlier this week. On Wednesday, he tweeted that the latest inflation report was another reason to “reconsider” the Fed’s strategy.
Biden’s allies insist that each of these are manageable elements. But the White House is already struggling to convince Americans that the economy is indeed doing well, at a time when all the major indicators are pointing in the right direction. And taken together, these looming hurdles are a reminder that Biden and his team have limited control over the course of the economy going into 2024.
“There will be a slowdown because economies are just cooling — they can’t grow indefinitely,” said a White House economic adviser who was granted anonymity to speak freely. “The only thing I’m worried about is the shock, which I can’t predict.”
Biden himself has shown some reluctance to shape the economic recovery, even during an extended road tour to demand credit for improving conditions across the country. In an otherwise triumphant speech in June designed to formalize his bidenomics agenda, Biden concluded by warning, “I’m not here to announce victory.”
He repeated the disclaimer in South Carolina last week and warned, “We still have work to do.”
Inside government, advisers said they were more focused on allaying voters’ concerns about the economy than promising a bright future. The White House has long been deeply frustrated by media coverage, which officials see as obsessing over the looming recession, even as the underlying data consistently showed signs of strength — a dynamic they blame in part for the public’s gloomy view how Biden dealt with the recession economy.
“We’ve heard doomsayers say that a recession has been looming for more than a year,” said a White House official, who has been allowed to remain anonymous to describe the views inside the building. “Of course there will always be bumps along the way, but we have dealt with unexpected bumps and our economic recovery has prevailed.”
The government has been trying to smooth out some of the impending turmoil that it can foresee. After the Supreme Court rejected Biden’s attempt to forgive billions of dollars in student debt, the White House rolled out a new strategy that will ease repayment penalties for financially vulnerable borrowers over the next year.
The on-ramp policy will not prevent the expected contraction in borrowers’ spending, which could impact and slow down the economy. But it could help spread some of the impact over several months rather than hitting it all at once.
“The hardship for households will be very real in some cases,” Marcus said. “Macroeconomically, I don’t think that will push us into a recession.”
Biden has also begun targeting individual Republicans on economic issues. After navigating a potentially disastrous debt ceiling standoff, he is now trying to protect himself from the political fallout of a possible government shutdown. In particular, the White House has singled out Republican lawmakers who opposed its policies — even as they touted the ways in which their districts have benefited.
But beyond that tyrant pulpit, Biden has few key levers left to stabilize the economy should it falter more severely, especially as much of the pandemic aid that has proved a crucial financial buffer in recent years runs out.
Although the White House has not commented on the Fed, advisers and allies have been closely watching the rate-hiking campaign, which many privately fear will go too far in its bid to lower inflation.
There is also some concern about how much longer the economy can maintain its pace and whether even small signs of a slowdown around this time next year could unravel all the work officials are now doing to sell voters Biden’s economic record.
But for now, Biden has navigated two years of pitfalls and emerged with a recovering economy. Voters might say they don’t feel it yet. Still, the White House is increasingly willing to embrace that framework — as long as it lasts.
“In almost every recession in modern American history, something bad has happened, and it was something bad that we didn’t anticipate,” said Justin Wolfers, an economist at the University of Michigan. “What could happen by 2024? A lot of bad things. Do you know what else could happen? Good things.”
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