WASHINGTON – President Joe Biden on Monday took a hit against political opponents, including former President Donald Trump, by touting the invigorating U.S. economy, which quickly recovered in his first six months in office.
But some economists fear that the administration’s aggressive efforts to boost economic growth could lead to a punitive recession next year.
Speaking at the White House on Monday morning, Biden reminded listeners of predictions of economic disaster that his critics said would follow his election as president.
Without naming him, Biden referred to his predecessor in citing his prediction that if Biden were to become president, the country would experience “a depression like we’ve never seen.”
3 million new jobs
Pointing out that the current reality of the US economy is quite different, Biden said, “We have gone from 60,000 jobs per month to 60,000 jobs every three days – over 600,000 jobs per month since I took office. Over 3 Million New It’s the fastest growing, I’m told, at this point in an administration’s history. “
In addition, he pointed out that the growth rate of the US economy is currently higher than it had been for almost 40 years.
“And now forecasters have doubled their projections for economic growth this year to 7% or more,” he said. “In fact, the United States is the only developed country in the world where growth projections are stronger today than they were before the pandemic.”
Certain justified credits
Even observers who don’t necessarily agree with Biden on economic policy agree that the president can take a substantial share of the credit for the economy’s rapid rebound.
“I think he can rightly take credit for having put in place an effective vaccination program,” said Desmond Lachman, senior researcher at the conservative American Enterprise Institute. “It means people can go back to work and all of these industries that have been hit hard enough by the pandemic can bounce back.”
But when it comes to economic policy, it is unclear how much of the current rebound is due to government action, and how much is a natural combination of delayed consumption by consumers and businesses across the country. which intensify at the same time to return to a semblance of normal.
In the right place at the right time
“There is no doubt that Biden, and the administration more broadly, are the beneficiaries of being in the right place at the right time,” said David Wilcox, senior researcher at the Peterson Institute for International Economics.
However, Wilcox said, “Biden and his administration have done some things that have surely helped accelerate the economic recovery. Aggressive efforts to distribute the vaccine surely rank number one on this list. More broadly, scientific system strengthening approaches public health, and the importance of following public health guidelines must have made a difference at the margins.
“Then, finally, a huge factor to consider is the enactment of the US stimulus package,” he added, “a historically significant stimulus injection – it will ultimately total $ 1.9 trillion – some of which is came online very quickly “.
Risks of overheating
It is this last factor, the stimulus, that worries Lachman and many conservative commentators.
Even before Biden took office, the government had spent nearly $ 4 trillion on various pandemic-related actions, including direct grants, the Paycheck Protection Program, and additional funding to help agencies to respond to the increased demand for services related to the pandemic response. In March, that number rose to nearly $ 6 trillion when Biden signed the $ 1.9 trillion US bailout.
This is all on top of the Federal Reserve’s promise to keep interest rates low, almost certainly until next year.
More proposed expenses
In his remarks Monday, Biden said it was essential for a continued recovery that Congress adopt another major initiative, this one related to infrastructure, that would commit the government to spending an additional $ 1 trillion or more.
“It’s really supercharging the economy,” said Lachman of the American Enterprise Institute, “and it’s doing it at the same time the Fed has stepped into the metal.”
Like a number of economists, including former Clinton administration Treasury Secretary Lawrence Summers, Lachman says he’s concerned that an excessive influx of cash into the economy could create an upward spiral of rising prices. wages and prices that will force the Federal Reserve to sharply raise interest rates, causing recession.
“This might all sound very good in 2021, but the question is, what will it look like in 2022?” Lachman said. “We could very well face a tough economic landing.”
The delta variant
The wild card in all of these considerations is the future path of the pandemic. Cases are increasing sharply in the United States, although from low levels. If the more infectious delta variant of the disease continues to develop, especially in unvaccinated populations, or if a vaccine-resistant variant emerges, much of the country’s progress could be reversed.
As if to warn the president of the dangers of economic pride, the stock market experienced its biggest single-day drop in two months on Monday, with the Dow Jones Industrial Average dropping 726 points, or about 2% of its value. Analysts attributed the dramatic drop to public concerns about the rising number of COVID-19 cases.
Most of that drop was recovered on Tuesday afternoon, but a message was clear: When it comes to the economic recovery, no one is quite sure whether the administration or the virus will have the final say.