Source: AUN News
President Biden was questioned about his most recent economic woe after a virtual conference with executives from the tech manufacturing industry on Monday. How concerned should Americans worry that the nation might be in a recession?
We won’t have a recession, he retorted.
Before critical economic data is expected to be released on Thursday that might, at least formally, indicate the beginning of a recession by a standard shorthand definition, the president’s advisers have spent a significant portion of the previous few days making that case publicly.
It is the most recent installment in a challenge that Vice President Biden has been up against since taking office: trying, mainly in vain, to convince Americans that the economic recovery is more robust than most people think.
After trying for more than a year to calm consumer concerns over skyrocketing prices, Biden administration officials have transitioned into a persistent public effort to ease worries that the country’s economy has fallen into recession. Authorities have heavily relied on the robustness of the labor market and regularly cited the standards employed by the committee for economic research that formally determines when recessions begin and finish.
The Federal Reserve has attempted to slow the economy to bring inflation under control, complicating the campaign. The risks of a policy-induced slowdown later this year increased with the expectation that the Fed would raise interest rates by three-quarters of a percentage point on Wednesday.
Many forecasts, some economic indicators, and the precise definitions of a recession used by the National Bureau of Economic Research’s business cycle date committee all agreed with the administration’s claims that the nation was not now in one.
At a White House briefing on Tuesday, Brian Deese, the head of the National Economic Council, stated that “consumer spending continues steady, and household balance sheets remain in good health.” He claimed that the entire body of economic data was “not consistent with a recession.”
The administration has struggled to persuade Americans to change their opinions about the economy because Mr. Biden and his staff have spent so much time denying talk of a recession. This illustrates how pessimistic Americans have gotten about the economy.
For more than a year, Vice President Biden has tried to convince Americans that the economy is robust and that the recent spike in inflation will eventually subside. He highlighted the quick creation of jobs and the declining unemployment rate, emphasizing Monday that it was now at 3.6 percent.
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The US has not purchased it. Consumer confidence has declined as prices for food, gas, and other items have increased. Just months before the midterm elections that will determine whether Democrats maintain control of Congress, voter dissatisfaction with Mr. Biden’s economic management has increased, as have Republican attacks, which have accused the president of policies that have fueled inflation and reduced Americans’ purchasing power.
A little more than half of the participants in a June national survey of Americans conducted by the online research platform Momentive for The New York Times indicated they thought the economy was already in a recession or a depression. The economy was described as “stagnating” by a different quarter. Respondents from the Republican party were more gloomy than those from the Democratic party, highlighting the continuous partisan divide in opinions of economic performance depending on who holds the White House.
However, a third of Democrats and over half of the independent voters believed the nation’s economy was in a depression or recession.
ET, July 26, 2022, 7:00
Officials within the administration routinely acknowledge the pressure rising prices have put on Americans, which has lowered the average worker’s pay after accounting for inflation. Additionally, they have voiced disappointment that Mr. Biden has not received greater recognition for a quick recovery in the employment market after inheriting an economy just emerging from the deep and sharp pandemic recession of 2020.
Officials have cited the United States’ ongoing solid job growth, unemployment close to a 50-year low, and gas prices have now declined for six consecutive weeks as proof that the country is not in a downturn.
However, the Biden administration’s insistence that the nation is not in a recession may be bringing more attention than the White House would prefer to the gloomy possibilities currently looming over the economy. For the first week of the Biden presidency, Fox, CNN, and CNBC all broke records for the number of times the word “recession” was used on the broadcast. According to data gathered by the GDELT Project, those three cable networks have collectively referenced “recession” more this month than every month since 2009 save one.
And if the Commerce Department’s report on Thursday indicates that the economy contracted for a second quarter this spring, authorities have been acutely aware that the U.S. economy could soon meet a generally used shorthand for recession.
This definition is standard and straightforward to understand: It asserts that a recession begins when the economy declines for two straight quarters. The American economy contracted by 1.6% in the first three months of this year. Many analysts predicted that the second quarter’s gross domestic product would continue to acquire, but some predicted marginally positive growth in its place.
International developments have not aided the White House’s argument. According to a doomsday projection from the International Monetary Fund, several pieces of evidence point to the possibility that the United States is already experiencing a “technical” recession, which the I.M.F. defines as two consecutive quarters of negative growth. Forecasters cautioned that slowing growth in China, America, and Europe increased the likelihood of a global recession.
Given the peculiar conditions of the pandemic recovery in the United States, especially in light of the robust job market, the government has attempted to argue that the conventional definition of a recession does not apply. Members of the White House Council of Economic Advisers wrote last week that “both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data — including the labor market, consumer and business spending, industrial production, and incomes.”
This week, representatives from the Treasury Department stated that “strong evidence suggests that the economy is not currently in a recession.” They highlighted a discrepancy between the gross domestic product, which accounts for the value of the products and services generated in the economy, and the alternative measure, gross domestic income, which adds up wages, profits, and investments when measuring economic growth. In the year’s first quarter, the gross domestic output declined while the gross household income rose.
In some ways, there was no immediate need for or capacity to resolve the issue. After its initial reading on Thursday, the Commerce Department will modify its second-quarter growth at least twice, and it may do the same with the first-quarter estimate in an annual update later this year. The nation might be repeatedly pushed into or out of the abbreviated recession criterion due to all those modifications. Even if economic growth readings were off by a few tenths of a percentage point, Americans would be hard-pressed to perceive a difference in their day-to-day lives.
However, the distinction is significant from a political and helpful standpoint. Growing economic pessimism has lowered Vice President Biden’s popularity and added to Democrats’ concerns that they may lose control of at least one chamber of Congress in the next midterm elections. Fear that the economy was about to enter a recession might lead to consumers cutting back on spending and firms reducing hiring. Walmart recently reduced its profit projections and claimed that high costs influenced customers’ purchasing decisions in its stores.
On Tuesday, Mr. Biden attempted to promote economic optimism by virtually joining SK Group officials to announce $22 billion in new investments in the United States. According to Mr. Biden, the assets are “another evidence that America is open for business.”
The idea that Mr. Biden is right now about the possibility of a recession but incorrect later on poses the most significant political risk to him. Even if the economy expanded in the second quarter, it still faces the risk of entering a recession this summer or just before the November elections, especially if oil prices continue to rise globally, a trend that administration officials attempted to avert.
The risks for the world economy are “overwhelmingly biassed to the downside,” the I.M.F. said on Tuesday. For the fourth quarter of 2023, it lowered its growth predictions in the United States and predicted just 0.6 percent annual growth.
No matter how you define a recession, such a slowdown, according to I.M.F. authorities, “will make it increasingly challenging to avert one.”
Analysis by: Advocacy Unified Network