Monday, July 15, 2024

Democrats fear Biden drama may squander goldilocks economy

Democrats fear Biden drama may squander goldilocks economy


The inflation report released Thursday represented virtually everything the White House has been hoping to see for years. New and used vehicle prices fell. Rents finally moderated. Overall prices dropped on a monthly basis for the first time in four years, raising the prospect that the Federal Reserve could cut interest rates before the November election.

And yet Democrats inside and outside the administration could only greet the data with a feeling of exasperation, knowing the news would be overshadowed by a second week of turmoil over President Biden’s fitness to lead the presidential ticket. Compounding their fears is the prospect that former president Donald Trump, if victorious in November, could for a second time inherit a growing economy that Democrats believe they deserve credit for fixing.

The missed opportunity to capitalize on the inflation report highlights the political fallout from Biden’s disastrous performance in the debate, which has spurred a wave of calls for him to step aside in favor of another party standard-bearer. The White House appeared unable to staunch the bleeding again on Thursday, as more Democrats in Congress called for the president to step aside amid intensifying concerns about his capacity for the job.

“There is broad frustration in the building that there will not be a political news cycle about this data,” said one person who spoke with senior White House officials, speaking on the condition of anonymity to reflect private conversations. “Everyone feels the strong inflation data is just getting lost in the political news right now. You can easily imagine an alternative political universe where this is the top story from the campaign.”

The controversy has raised the prospect that Democrats could fail to take advantage of a spate of economic news that would otherwise be expected to buoy the president’s electoral prospects. In addition to moderating inflation, the economy is set to grow by 2 percent in the second quarter of this year. Wage growth is up, and the number of weekly jobless claims ticked down again to the lowest level since May, suggesting the economy can keep growing even as inflation falls.

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The Bureau of Labor Statistics reported Thursday that prices rose at a 3 percent annual pace, one of the lowest since Biden’s first year in office and close to Federal Reserve’s goal inflation benchmark. The better-than-expected report bolsters hopes for a September interest rate cut, bringing long-awaited relief to millions of borrowers throughout the economy.

“Democrats had a strategy for this campaign, and it was touting Biden’s accomplishments on the economy, which are becoming clearer by the day. We’re not hearing about that, and Democrats are worried it undermines their whole strategy for the campaign,” said Dean Baker, a liberal economist at the Center for Economic and Policy Research, a left-leaning think tank. “As long as there are concerns about Biden’s health, the economic news will not be front and center, no matter how good it is.”

In a statement, the Biden campaign said voters would focus on the president’s economic policies when voting this November.

“When Americans across the country head to the ballot box, they’ll be focused on kitchen table issues like rent and food prices, and how the next president’s policies will impact their everyday lives,” Biden campaign spokesman Seth Schuster said in a statement. “Joe Biden is fighting to lower costs for American families and is delivering — lowering inflation, creating new jobs, and making the wealthy pay their fair share.”

Conservatives strongly dispute the idea that Biden deserves credit for the economy, arguing his $1.9 trillion 2021 stimulus package spurred additional inflation that eroded worker earnings. Stephen Miran, who served in the Treasury Department during the Trump administration, said wages adjusted for inflation remain down by about 3 percent since the end of 2020 for Americans who had not changed their jobs. He also pointed to the approximate doubling of the cost of mortgage payments on the new median home, as housing prices exploded following the pandemic.

“It’s pretty patronizing to lecture Americans about how they should be feeling based on the quirks of measurement of economic data,” Miran said. “There’s more to measuring well-being than looking at the one-month inflation data.”

It’s also not clear the extent to which replacing Biden at the top of the ticket would give Democrats a chance to improve voters’ perceptions of their economic stewardship. Elaine Kamarck, director of the Center for Effective Public Management at the Brookings Institution, a Washington-based think tank, said the economic numbers are unlikely to significantly impact the party’s decision about who should run at the top of the ticket.

“They’ve had trouble getting credit for other good economic news, too, so it’s a constant frustration for the White House and Democrats,” Kamarck said. “The controversy is about his mental state — not his handling of the economy.”

Still, the positive economic data could intensify the sense of frustration about the election. Democrats already believe that Trump lucked out in his first term in presiding over the economic growth that liberals attribute to President Barack Obama’s policies. Now, Democrats are bracing for the prospect that Trump could again inherit an economy they believe is booming due to the policies passed during their time in government.

“Until this is over, it’s going to be very hard for anything else to break through,” said Bill Galston, who served as a policy aide to President Bill Clinton. “For heaven’s sake, when the sun is out the stars are invisible. And right now, the Biden situation is the sun.”



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