Opinion: Biden takes no credit for the improvement in the US economy, but it will not cost him votes

Opinion: Biden takes no credit for the improvement in the US economy, but it will not cost him votes

The US economy and polls have been good and bad news for Joe Biden, but Republicans have more to worry about than what voters think of the US president.

Biden’s economy is based on three pillars: radically reorienting the economy away from fossil fuels toward wind, solar, and electric vehicles; Strengthen national security by ensuring enough durable goods that support America’s environmental industries and semiconductor production are manufactured, and address income inequality by strengthening unions and minority participation in both infrastructure and industrial policy spending.

However, green energy generation has proven to be more expensive than expected. In Texas, for example, voters are asked to approve special funding to support the construction of natural gas plants to support green energy in the state when the wind isn’t blowing and peak demand exceeds what the sun can provide.
Most wind and solar costs are paid up front. These projects do not require continuous purchase of fuel and employ fewer workers, but they are capital intensive. Green energy made more economic sense when interest rates were low, but they are likely to remain high, and some offshore wind projects have been abandoned. Utility regulators are reluctant to approve rate increases needed to cover high debt service.
Inevitably, we must pay for green energy with higher electricity prices, taxes to pay for subsidies, or current policy—that is, federal government borrowing to partially ensure green energy and electric vehicles. In 2019, the US budget deficit was less than $1 trillion. In 2023, it will likely reach $1.6 trillion and continue to grow. This pushes interest rates higher and leads to inflation.

Large deficits and excessive demand are important reasons why labor markets are unbalanced. The ratio of job seekers to job opportunities is about 1.5. In the golden decade before Covid-19, when inflation was under control, the ratio was much lower.
An analysis by former Federal Reserve Chairman Ben Bernanke, now a distinguished senior fellow at the Hutchins Center at Brookings, and Oliver Blanchard, a senior fellow at the Peterson Institute for International Economics, suggests that the jobseekers-to-employment ratio would fall below 1.0 to bring back the U.S. To the inflation level of 2%.
The last time the country faced such an inflationary challenge, Chairman Paul Volcker moved quickly to raise interest rates. Current Fed Chairman Jerome Powell has reasons to go more slowly. A significant amount of commercial real estate and corporate debt is scheduled to be rolled over this year and into 2027. The more the Fed pushes interest rates higher, the more likely more regional banks and corporate insolvencies will fail.

But going slowly leads to a tightening of inflation expectations. The Conference Board’s measure of one-year inflation expectations has remained at around 5.7% for months. Meanwhile, the New York Fed’s measure is 3.6%. These rates average 4.7%, which is slightly higher than the current US core inflation rate of 4.3%.
Despite all this, Americans do not expect things to improve much. The benefits of Biden’s programs are gunshots — those workers setting up new semiconductor factories or unionizing are looking forward to bigger paydays. However, unions represent only 6% of private sector workers in the United States, and most voters are not riding the infrastructure and industrial policy trains.
The U.S. economy is likely to slow toward the end of this year and into 2024 as pandemic-era consumer savings run out. Additionally, credit tightening as well as the restart of student debt payments limits consumers’ ability to compensate by borrowing. However, the slowdown is likely to be sub-1% growth rather than a recession, and stronger growth should resume in time before the presidential election. For 2024. Campaign.

Currently, some polls suggest that former President Donald Trump may win more votes than Biden in 2024. However, Trump’s advantage is not as large as what Democratic presidential nominee Hillary Clinton was in 2016 when she won the American popular vote but She lost in the electoral college. Moreover, Republicans’ obsession with cultural issues and Trump’s ongoing legal troubles make him less attractive than Biden in states like Wisconsin, Michigan, and Pennsylvania. Enough voters in these and other states that Trump flipped in 2016 now appear willing to stick with Biden.
Peter Morrissey is an economist, business professor emeritus at the University of Maryland, and a national columnist.
more: Deutsche Bank warns that the stagflation of the 1970s may be at risk of repeating itself

    (tags for translation)article_opinion

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *