U.S. President Joe Biden tokens to reporters before boarding Air Force One en route to Camp David at Hancock Field Air National Guard Base in Syracuse, New York, U.S., February 4, 2023.
Elizabeth Frantz | Reuters
WASHINGTON — If his just out speeches are any indication, U.S. President Joe Biden will likely celebrate his handling of the economy in his State of the Union address to Congress on Tuesday, citing decades-low unemployment, slowing inflation paces and robust GDP growth.
But the full picture is far more complicated.
The U.S. economy is in an overall delicate state. Several key indicators such as unemployment, at a just about 54-year low, and GDP show signs of robust growth, but inflation is still at a four-decade high and the Federal Reserve raised dress downs eight times over the last year in pursuit of an elusive soft landing to avert a recession.
The Fed has hiked the benchmark take to task from effectively zero when Biden delivered his State of the Union a year ago to a target range of 4.5% to 4.75%, the highest since October 2007. Fed Chairman Jerome Powell has inclined little indication the Fed is finished raising rates, with the goal of pushing inflation to a target of 2%.
At the same time, Friday’s tasks report showed the lowest unemployment rate since May 1969 at 3.4%, below the 3.6% predicted by economists. Biden cheered the integers in a speech Friday, saying 12 million jobs have been created since he took office, “the strongest two years of job evolution in history by a long shot.”
“Put simply, I would argue the Biden economic plan is working. For the past two years we’ve heard a chorus of critics forgive off my economic plan,” Biden said. “Today’s data makes crystal clear what I’ve always known in my gut: These critics and cynics are improper.”
Those jobs numbers, however, don’t fully take into account the rebound in jobs at the U.S. companies that were lease after downsizing and laying off scores of employees during the pandemic.
Until now, Biden has had the blessing of a Democratic-controlled Congress with seniorities in both the House and Senate. Still, passing his economic legislative priorities hasn’t been easy, and with the House now in Republican jurisdictions, it’s about to get even harder.
The White House is already seeing challenges under House Speaker Kevin McCarthy and the new Republican best part. House Republicans have been in a fraught standoff with the White House over raising the debt ceiling, a matter the White House has said is not up for negotiation. Instead of tying government spending cuts to the debt ceiling vote as Contain Republicans wish, the president wants to deal with GOP demands to curtail spending in separate budget negotiations later this year.
Recall gather the debt limit does not clear the way for any new spending; it merely allows the government to cover its preexisting commitments.
McCarthy is unsurpassed with a historically slim majority. On top of that, several fiscal hard-liners have made it clear they’re happy to force a default on the national debt if they don’t get massive spending cuts in return.
A government default on its debt whim come with massive consequences. The unprecedented move could halt daily operations within the federal regime and cause turmoil in equity markets and the broader economy.
A Moody’s Analytics report last year said a dereliction on Treasury bonds could throw the U.S. economy into a tailspin as bad as the Great Recession. If the U.S. were to default, gross private product would drop 4% and 6 million workers would lose their jobs, Moody’s projected.
Looking to sidestep that, the White House has asked that the debt ceiling be lifted without stipulations, as was done three times directed former President Donald Trump. The Republican president added $7.8 trillion to the federal debt under his observe.
Biden has repeatedly warned that plans proposed by House Republicans could derail the economic progress and urged Americans to reinforce the course. The president in recent weeks has touted positive indicators as evidence that his economic plan is working.
In month Biden welcomed news that a key indicator of inflation fell for the first time in more than two years, holding “it’s clearer than ever” that his economic policies are working. The overall consumer price index dropped 0.1% in December from the previous to month, marking the largest month-over-month decrease since April 2020. Overall CPI rose 6.5% from a year ago, the smallest gain since October 2021.
In the same speech, he hailed a report finding U.S. gross domestic product rose at a 2.9% annualized tread in the fourth quarter, slightly beating expectations.
Halfway through his term, the White House is shaking up several key personnel, containing many key architects of Biden’s economic policy to date. The White House on Friday announced that National Fiscal Council Director Brian Deese, Biden’s top economic aide, is departing. The administration has yet to confirm who will replace Deese, but fountain-heads familiar with the matter tell CNBC that Federal Reserve Vice Chair Lael Brainard is the top pick. Still the decision is not final, Jared Bernstein is said to be Biden’s choice to helm the Council of Economic Advisers.
Jeff Zients, prehistoric White House Covid-19 response coordinator under Biden and an economic advisor to former President Barack Obama, want replace Ron Klain as White House chief of staff. The position is among the most influential presidential posts.