February 22, 2024
A Fed-induced recession could make Democrats' momentum evaporate.

President Joe Biden has a tough challenge ahead of him: convincing the country that inflation is cresting and the economy is not in recession without appearing out of touch to ordinary voters in the fast-approaching midterm elections.

The official statistics permit Biden to make this case. Consumer prices remain high by normal standards, but they are no longer rising by annualized rates that rival 40-year highs. The cooling of inflation has been led by a drop in energy costs, especially at the gasoline pump. The economy did contract for two consecutive quarters this year, usually the technical definition of a recession. The National Bureau of Economic Research, though, has yet to declare such a sustained downturn, and the labor market (along with some other metrics) suggests the overall picture is more complicated than recent GDP reports indicate.

Gas prices and jobs are the White House’s two favorite economic statistics because the former is going down and the latter is going up — for now.

“We are seeing some signs that inflation may be (may be, I’m not going to overpromise you) may be beginning to ease,” Biden said with uncharacteristic restraint. “Couple that with the fact that gas prices have now fallen 80 straight days, the fastest decline in over a decade, and the price at the pump is now $1.20 a gallon less than it was [at] the beginning of summer.”

The White House isn’t out of the woods yet. The Federal Reserve’s interest rate hikes that are curbing inflation are likely to continue and could push the economy into an undeniable recession. That’s what happened in President Ronald Reagan’s first midterm election in 1982, when unemployment spiked to 10.8% and Republicans lost 26 House seats.

OPEC+ isn’t being cooperative on the energy production front, even after Biden was perceived as going hat-in-hand to Saudi Arabia over the summer. Prices in other sectors, such as groceries, haven’t seen much improvement. And even Democratic economists, such as former top Obama administration adviser Jason Furman, warn that some recent Biden administration fiscal policy moves, including the student loan forgiveness plan, are inflationary.

But the bigger problem is that the official statistics don’t always tell the whole story. Public confidence in Biden’s management of the economy declined while unemployment was low and before inflation was running at a 41-year high. The president is over 20 percentage points underwater on the economy, with a 58.6% disapproval rating in the RealClearPolitics polling average. That’s worse than his overall job approval.

A recent poll by Cinch Home Services found that 76% already think the economy is in recession. A Morning Consult survey in July discovered that 65% believed a recession was underway, higher than during the pandemic-induced economic slowdown of 2020. Partisanship plays a role in these numbers — Republicans are more pessimistic about the economy under Biden, Democrats more optimistic — but these are ominous numbers for the party in power.

There’s also a limit to how much incumbents can alter public opinion on these matters without eliciting backlash. “Most seem to feel that if we have a recession, it will not be deep and that we’ll come out of it relatively soon, six months at most, and I’d like to think that is true,” President George H.W. Bush predicted in November 1991.

After the decline happened, Bush economic adviser Michael Boskin said in July 1991, “The recession appears to have ended in the spring and a recovery has begun.” In October 1991, Treasury Secretary Robert Mosbacher said flatly, “The recession is over.” In remarks he would repeat ad nauseum in the following year’s reelection campaign, Vice President Dan Quayle added in November 1991, “The country is out of the recession.”

“That’s what they’ve been telling you all along, things are great, you’re just too dumb to see it,” Democratic presidential nominee Bill Clinton said in August 1992.

Technically, the recession did end in March 1991. Jobs, consumer confidence, and public opinion lagged behind. Clinton’s Biden-endorsed campaign prevailed, running against the “worst economy since the Great Depression,” as the Bush-Quayle ticket lost while citing the National Bureau of Economic Research.

Biden is folksier than Bush and arguably dealing with a less hostile media environment. There may be no grocery store scanner moments this fall (or they may be limited to Republican Senate candidates). But misleading talking points about “zero inflation” may sting as the midterm election season heads into the home stretch.

“It’s the economy, stupid,” Clinton campaign adviser James Carville said 30 years ago. But that’s defined by more than GDP — or the consumer price index.

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