Recession not inevitable: Is Biden right?
- On June 16, 2022, President Biden spoke to the Associated Press about rising inflation noting, “First of all, [recession] is not inevitable [...] Secondly, we’re in a stronger position than any nation in the world to overcome this inflation.”
- According to the US Bureau of Labor Statistics, inflation rose to 8.6% by the end of May 2022, which is “the largest 12-month increase since the period ending December 1981.”
- In May, the price of living increased across the board with energy at 3.9%, gasoline at 4.1%, and food rose at 1.2%. The largest contributors of the inflation spike came from shelter, airfares, and vehicles.
- Multiple stimulus checks were released by both President Trump and President Biden during the duration of the COVID-19 pandemic’s worst months; checks ranging from $600 to $1,400 per person.
While inflation is currently too high and a few other wonky economic measures have recently put fears of a recession into the minds of economists, the fundamentals of the American economy are actually fairly robust at the moment. Employment is currently about as high as it has ever been, and as a result, Americans are finally starting to see wages rise. Our economy's buying power due to employment levels is compounded by the fact that many Americans have more savings than they typically would, largely due to changing spending patterns in the pandemic and stimulus measures. Likewise, many companies are also sitting on larger than usual cash reserves, meaning they may be able to ward off a spiral into recession.
A recession is not inevitable as the federal reserve has started to increase interest rates in an effort to curb inflation. This will certainly squeeze the housing and credit markets but should help to moderate inflation. Further, the current economic situation is fundamentally different from the 1929 stock market crash or the 2008 financial crisis in that a singular surprise event hasn't triggered it, and the government has had time to prepare a response using all available avenues. During the pandemic, we saw that the government was able to greatly intervene in the economy to smooth out troubles. This amount of intervention should prove to anyone that nothing is inevitable, certainly not a recession. The experienced hands at the federal reserve have the difficult task of creating a soft landing by bringing inflation down without raising interest rates too aggressively, a fine line to walk but certainly not impossible.
Any assessment made by Joe Biden or his administration about economic forecasts should be understood as either ignorance or blatant falsehoods because that's what his administration has been continuously churning out since his term began. The Biden administration's predictions and public pronouncements about the economy have been consistently and painfully wrong. Last year, Biden and Treasury Secretary Janet Yellen both said that inflation would be 'transitory.' A year later, Yellen admitted she was wrong. Then there was talk of 'peak inflation,' implying that inflation had peaked and would begin to trend downward. That was last December. Inflation in 2022 has continued its upward trend.
Biden has reversed many of Trump's successful economic and energy policies. The US was a net oil exporter when Trump left office. Biden's administration has also taken an antagonistic approach toward oil production generally, even going so far as to blame oil companies for the price at the pump. Yet, he also called record-high gas prices part of an 'incredible transition' away from fossil fuels. To add even more fuel (no pun intended) to the fire, Biden pumped trillions of dollars in federal spending during supply chain interruptions, causing prices to rise. He further incentivized millions to drop out of the labor force, adding pressure to the supply chain.
Now, he has proposed a three-month gas tax holiday. While that will provide small, short-term relief for Americans, it is merely a band-aid intended to cover the gaping economic wound brought on by Biden's economic policies. His administration fundamentally lacks an understanding of how the economy works, making a recession all but inevitable.