The U.S. economy is hitting a stride, growing at a 2.4-percent rate in the second quarter in a surprisingly strong showing that adds confidence to the idea that the nation may avoid a long-threatened recession.
The growing economy comes coupled with other good economic news: Inflation is slowing, and unemployment sits at just 3.6 percent.
Markets have noticed. The Dow Jones Industrial Average is up more than 4 percent over the last month and more than 6 percent this year, despite dropping Thursday.
It's all good news for the White House and President Biden, who have used the recent string of positive economic announcements to tout their stewardship over the economy as they head into an election next year.
But it doesn't mean the administration can breathe easy — over the economy or Biden’s political future.
Some economists think a recession is still possible, and Republicans, while more focused in recent weeks on probes into Hunter Biden's legal difficulties, have not dropped their economic criticisms of the White House.
“It's entertaining to watch the administration sit here and say, ‘Oh everything’s great now,” Rep. Mike Lawler (R-N.Y.) said Thursday.
“Yes, inflation has come down, but the economy in no way is growing at the levels that it needs to be and we need to enact reasonable and responsible budget cuts going forward to right size our economy and get the country moving in the right direction,” added Lawler, who represents a swing district and is one of the more vulnerable House Republicans in next year’s election.
The White House rebuked GOP lawmakers, pointing remarks from to Fox Business Channel’s Cheryl Casone, who said Thursday: “There goes that recession talk, right?”
“Even Fox Business is welcoming today’s blockbuster economic growth numbers, the latest in a long line of proof points that Bidenomics is delivering for middle class families,” spokesperson Andrew Bates said in a memo. “That’s because this strong growth report is objectively good news for the American people, which elected officials should support regardless of their political party.”
The resilience of the economy has been a surprise for a number of reasons.
Market commentators for most of Biden’s term have been worried about a recession, and as the Federal Reserve launched a series of interest rate hikes in response to rising inflation, the fear was that a downturn would be hard to avoid.
The Federal Reserve itself in March predicted a “mild recession,” before reversing its position Wednesday after raising interest rates another quarter-percent.
“The staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession,” Federal Reserve chairman Jerome Powell said Wednesday.
That resilience has taken several different forms but has been nowhere more noticeable than in the labor market. Unemployment has remained near historic lows even as the Fed has undertaken one of the fastest interest rate tightening cycles on record in response to prices that climbed as high as 9.1 percent annually last June.
Lower employment is usually associated with lower prices due to how much businesses have to pay workers and still turn a profit. But that relationship has been called into question during the recent inflation, as prices have been steadily falling since last June while unemployment has remained near record lows.
The unusual nature of the post-pandemic inflation, driven in part by massive consumer savings during the lockdown era and supply chain shutdowns, was likely the primary reason. Price fluctuations occurred in different sectors of the economy at different times, and companies raked in record profits, choosing to keep prices high.
In making the case for its handling of the economy, the Biden administration Thursday pointed to investments it made when Democrats held majorities in Congress in 2021 and 2022. Those investments were mostly in the Inflation Reduction Act, a bipartisan transportation and infrastructure bill and a major semiconductor bill.
The White House Council of Economic Advisers (CEA) touted the investment in plants and equipment in a blog post Thursday, noting its contribution to the beefy GDP number.
“Nonresidential private fixed investment accelerated, contributing 1 percentage point to [second quarter] growth. Private construction of manufacturing facilities alone, such as factories, contributed about 0.4 percentage point, this category’s largest growth contribution since 1981,” economists with the CEA wrote.
Some key factors do leave a number of economists wary of another ding on the economy later this year. Millions will see an end to the three-year pause in student loan payments later this year, which could put a crunch on consumer spending.
Interest rate hikes have also weighed heavily on the housing market for more than a year, driving high mortgage rates and dampening demand.
Demand is beginning to rise again, but so are prices with would-be sellers reluctant to give up their low mortgage rates and put their homes on the market.
Powell said Wednesday that the housing market has “a ways to go” before it reaches a balance and prices cool.
The news of economic growth comes just weeks after the White House launched its “Bideonomics” messaging, which was met with speculation at the time about whether they were taking a victory lap too soon.
Throughout Biden’s presidency, Republicans have hammered him for high inflation, and they sought to use it against Democrats in the 2022 midterms. They are expected to focus on the economy, along with their investigations into the Biden family, again in 2024.
Biden celebrated that the GDP number Thursday, arguing that the economic progress “wasn’t inevitable or accidental” but was due to Bidenomics — a message voters can expect to keep hearing as Biden and officials traverse the country to tout their work on the economy.
“[H]ard-working Americans are seeing the results: Our unemployment rate remains near record lows, inflation has fallen by two thirds, real wages are higher than they were before the pandemic, and we’ve seen more than half a trillion dollars in private sector investment commitments in clean energy and manufacturing,” he said.
By Steve Cortes for RealClearPolitics
A majority Americans begin 2022 full of worry and dread. During President Biden’s first year in the White House, societal anxiety surged, including among voters who identify as independents and Democrats. In the newest Axios/Momentive year-end survey, 2021 saw a 50% increase in fear about what 2022 will bring among independents. Democrats weren’t much more sanguine. They began last year with refreshing optimism as their party took control of the White House and Congress, with only 19% of Democratic voters declaring themselves fearful about 2021. By year’s end, that number had surged to 45%.
Reflecting this dour assessment, the RealClearPolitics polling average of Joe Biden’s approve/disapprove ratio also receded sharply for the last year, from a stellar 20-percentage-point surplus in his favor on Inauguration Day, to a minus- 10-point rating.
Given this environment, Republicans naturally grow more confident about the midterm elections. But taking nominal control of Capitol Hill won’t be enough. Will Mitch McConnell and Kevin McCarthy and their lieutenants be content with stopping the woke and socialist-inspired agenda of progressives? Or will they boldly implement a full-throttle populist nationalist “America First” agenda?
Doing so requires focus, not a scattershot approach. The next Republican-majority Congress must concentrate intensely on a short list of the most pressing issues, where only the populists can rescue everyday Americans from the abuses of oligarchs and their handmaidens in both major political parties.
The first issue is inflation. This is the factor that explains the 30-point approval swing that has buried Biden’s White House in a matter of months. Inflation is, essentially, a tax — and a highly regressive one at that. After decades of restrained inflation, Americans understandably fear the continued loss of prosperity as their standard of living erodes by the day. For eight straight months, real wages have declined under Biden.
The ravages of inflation, predictably, hit the working classes the hardest. For example, a recent Gallup poll found that among modest earners making $40,000 or less per year, 71% report that inflation is a severe or moderate hardship. In contrast, among workers earning $100,000 per year or more, only 2% cited inflation as a severe hardship. A November Quinnipiac survey found that Biden still enjoyed a slight positive approval rating on the economy among those with college degrees, 50%-49%. But among non-degree holders, Biden languishes 54 percentage points underwater, with only 20% approval and 74% disapproval. Inflation helps explain this huge chasm.
What solutions should be offered? For starters, stop unfair labor competition so that workers have a chance to keep pace with the soaring prices of Biden’s inflation surge. Stop allowing millions of largely unvetted, illegal migrants to simply waltz into America under the bogus pretense of seeking asylum.
For our citizens, end obstacles to work, including the administration’s capricious and unscientific workplace vaccine mandates.
Return to the pro-energy policies of the previous administration: oil pipeline construction, rejuvenated drilling, and aggressive exploration on government lands so that Americans can benefit from cheap, abundant, domestic fuel.
Longer term, continue the process that President Trump began of demanding fairness and reciprocity in trade deals, especially with China. Once an America First president is elected in 2024, change tax and tariff policies permanently to compel the on-shoring of production back to the United States, especially in critical industries like semiconductors and medicines.
But healing the economy alone is not enough.
Our society suffers a sickness of the soul as well, and legions of everyday Americans feel silenced and intimidated by ruling class elites who insist that we pretend to believe fundamental myths, like the existence of dozens of genders. It’s high time for politicians to speak publicly the way the vast majority of Americans speak privately regarding hot-button cultural issues.
As a recent Rasmussen poll revealed, 75% of Americans agree that only two human sexes exist. Only 18% believe in multiple genders, and yet that small minority drives education policy and makes nearly every important cultural decision for our society, declaring the massive supermajority of Americans to be hopeless bigots for accepting the reality of humanity as male and female.
From a policy standpoint, the America First agenda must embrace this issue for elections, from school boards all the way to the U.S. Senate. Stop radical teachers and their unions from sexualizing young children and indoctrinating them with unscientific gender-fluid psychobabble. Forbid any public buildings or funds for such atrocities as drag-queen story times for children. Make illegal the infiltration of girls’ and women’s sports by biological males.
The common theme with these two issues is protection. Right now, powerful forces collude to oppress the masses, via financial and cultural repression. Only the emerging populist nationalist movement can protect citizens in both realms. Restoring wages and restoring gender sanity represent an agenda worthy of a great movement in this new year.
Syndicated with permission from RealClearWire.
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