Biden faces a moment of truth on the economy this week

But as he recovers from his Covid-19 infection, President Joe Biden faces a new moment of truth this week about an economy that is stuck in an identity crisis and buffeted by unpredictable external forces.
At any other time, a president presiding over an unemployment rate of 3.6% — a bright number that would normally suggest a healthy economy — would expect his approval rating to be around 50% and heading for a second term. But Biden’s job performance rating plummeted in the 1930s, and Democrats are bracing for big losses in November’s midterm elections.
The culprit is inflation, a corrosive force that can demoralize every voter. Inflation has hit 40-year highs due to raging demand and Covid-compromised supply chains, exacerbated by a spike in oil prices. And depending on who you believe, Biden’s $1.9 trillion economic bailout injected a torrent of cash into the economy at the wrong time.
In short, almost everything has gotten more expensive this year — especially day-to-day expenses most Americans can’t avoid, like food, housing, and gas — which is bad news for the ruling party in Washington. in the run up to the elections. Notably in this CNN poll, 75% rated inflation and the cost of living as the most important economic issue facing their family. Last summer, that figure was 43%.

Expect several key reports on US economic health and consumer prices this week to provide some insight into the seriousness of the situation. The Federal Reserve is also expected to raise interest rates again on Wednesday in a bid to tame inflation, although some experts believe the Fed’s aggressive new strategy has come too late and risks tipping the economy into a tailspin. recession.

As CNN Business’ Nicole Goodkind wrote in an article titled “What the Fed and Madonna have in common,” over the weekend, “The reliability of the central bank depends on whether Americans believe it is … reliable”.
“If Fed Chairman Jerome Powell says the Fed will cut historically high rates of inflation, Americans believe him and change their behavior accordingly. That’s a self-fulfilling prophecy, the Fed’s version of the Secret,” writes Goodkind.

“But perception doesn’t always match reality, and Federal Reserve economists are as sensitive to capricious economic changes as you and I are. There are no hard and fast rules to follow; they make monetary policy by trial and mistakes. , and there were mistakes,” she continues.

“The Fed, much like Madonna, is constantly changing. This institution that aims to project an aura of stability is not beyond surprising.”

Meanwhile, amid all the attention on inflation eroding the strength of American paychecks, Goodkind notes that this week marks a sobering milestone for struggling American families: It makes 13 years since the last time the US federal minimum wage was raised, to $7.25 an hour. , making it the longest period without a raise since the enactment of the federal minimum wage in 1938. (About 30 states and Washington, D.C. have a minimum wage above the federal standard.)

That can’t help Biden in the face of dismal economic poll numbers. Just 18% of Americans in this CNN survey described the national economy as being in good shape, while 82% said economic conditions were poor.

The Conference Board’s latest consumer confidence index is due out on Tuesday, after last month’s report showed a loss in confidence amid high gas and food prices and rising recession risks.

Reacting to news earlier this month that inflation hit a new pandemic-era high in June, with US consumer prices jumping 9.1% year-on-year, the White House took advantage of a more recent drop in gasoline prices, while complaining that the price drop was not covered by the media with the same intensity that accompanied the price rise.

But public perceptions of the economy are not likely to change that quickly.

Even if this week’s data suggests the economy is not heading into a recession, it will still be a tough sell for the White House. Any president who says the economy isn’t really as bad as it seems to voters is in trouble.

About Therese Williams

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