BLOOMBERG – The latest economic data from the United States provided fresh fuel for a political debate on President Joe Biden’s response to inflation. a battle he’s consistently losing to Republicans, who have criticized him for the biggest rise in the cost of living for Americans in four decades.
Biden accused Thursday on the first decline in United States gross domestic product (GDP) since the outbreak of the Covid-19 crisis in 2020 on “technical factors” in a statement praising the “sharp” rise in consumer spending and business investment and residential real estate.
Biden wasn’t wrong: GDP for the first three months of this year was hit by one of the biggest trade contractions in the post-WWII era. This is because US businesses and consumers have bought many foreign products, while most other economies do not buy US products to the same extent.
But the rejection of inflation by the administration over the past year as “Temporary” led many Americans to conclude that the President wasn’t doing enough to bring down rising consumer prices. The risk is that Republicans will find more traction with a line of attack that favored them in November’s midterm elections of seizing control of at least one chamber of Congress from Democrats.
Thursday’s data showed that GDP contracted by an annual pace of 1.4% while prices rose 8%, underscoring the worst inflation since 1981. Biden pointed to an increase in consumer spending, as well as business and residential investment. But there are increasing signs that higher prices are hitting American households: it is estimated that consumption has shrunk over the past two months.
“Accelerating inflation, a workers’ crisis and the growing risk of a significant recession are the Biden administration’s hallmark economic failures, and they are likely to get worse,” Texas Rep. Kevin Brady, a senior Republican, said in a statement that House Ways and Means Committee.
Other Republican lawmakers compared Biden to Jimmy Carter, the one-term Democratic president who lost in 1980 amid riots over stagflation — weak growth coupled with high inflation.
The disappointing economic numbers are accompanied by widespread warnings that the United States could slip into recession next year, a result of high inflation and the Federal Reserve’s tightening campaign to stem it.
“I’m not worried about a recession,” Biden said in a White House speech. “No one is predicting a recession right now. Some are predicting a recession could hit in 2023,” the president said, urging Republicans to join efforts to ease the fiscal challenge.
Also on Thursday morning, Treasury Secretary Janet Yellen delivered a keynote address on “Lessons from the US economic policy response to Covid-19” at a two-day conference hosted by the Brookings Institution. Yellen’s comments weren’t a reference to inflation, the main criticism of the March 2021 pandemic relief package for the pandemic of $1.9 trillion, which Republicans blame for fueling higher prices and convincing many Americans have to remain unemployed despite record job offers.
Yellen said the American rescue plan “It played a pivotal role in fostering strong growth into 2021,” which outperformed other advanced economies and sparked a faster-than-usual recovery in the labor market after a recession.
“Throughout 2020 and into 2021, the trajectory of the pandemic, including its severity and the role of future virus strains, could not be predicted,” Yellen said. “The tail risk in 2020 and 2021 was a recession that could rival the Great Depression.”
The official did not answer questions at the event or comment on Thursday’s GDP release.
Meanwhile, Republican Senate leader Mitch McConnell said of the data that “galloping inflation is crushing America’s working families under the watchful eye of Democrats” and that they “reversed the recovery and we are actually going backwards.”
Now “they want to raise taxes for the American people,” he said.
Biden made a similar accusation against Republicans, saying they are trying to fight inflation and other economic ills by raising taxes on “middle-class families,” citing a plan by Florida Sen. Rick Scott, who was leading the committee on the Senate Republican to lead ‘ campaign for November midterm elections.
–With the help of Christopher Condon and Jenny Leonard.