When Joe Biden was president for 50 days, I wrote a column declaring that his presidency was already a success. Not only had Biden acted diligently in the fight against the pandemic, the Senate had also approved the $1,900 billion stimulus package. The measures, which benefited lower incomes in particular, would make the US economy more equitable.
I heeded the warnings from Harvard economist Larry Summers, among others, that the stimulus package was so large that it would inevitably lead to inflation and that the money would be better used for the major infrastructure and climate projects that Biden had also promised. in the wind. If inflation were the result of wage increases, I reasoned, most Americans would be better off despite inflation.
death blow
The $1,900 billion stimulus package has proved the death knell for Biden’s presidency. Inflation in the United States reached 9.1 percent last month, the highest level in 40 years. Unlike in the EU, inflation is not mainly caused by rising energy and food prices. Core inflation, which ignores volatile food and energy prices, also rose nearly 6 percent in the US last month.
Last week, Democratic Senator Joe Manchin said he would definitely not support Biden’s climate bill, which promised ambitious climate goals and hundreds of billions of dollars in clean energy investments. Biden had pressured Manchin, who represents the conservative state of Virginia, last year to get a majority of the $1,900 billion stimulus package in the Senate. With the loss of Manchin’s support, Biden’s political agenda is gone.
The Federal Reserve will meet this week. Analysts expect the Federal Reserve to raise the key rate by a full percent to cool the economy. According to Summers, the US needs a 5 percent unemployment rate for five years or a 10 percent unemployment rate for a year to bring inflation back under control. According to Nouriel Roubini, the American economics professor who correctly predicted the great financial crisis of 2008, the US is facing a severe recession and debt crisis.
gone wrong
Where did it go wrong? High inflation in the US reflects supply chain disruptions caused by the pandemic. This led to people spending less money on services and much more money on goods, which in turn led to shortages of sea containers, port capacity and microchips. Also, the large amounts paid out in the US in the form of checks, unemployment benefits and child support made Americans less likely to return to the labor market. High fuel prices do play a role in the US, but to a lesser extent than in Europe.
President Biden aimed high with an ambitious agenda. He wanted to show the world that the US is a reliable ally on important issues such as the climate. After the dramatic withdrawal of troops from Afghanistan a year ago, Biden retaliated by reviving the Atlantic alliance and helping Ukraine defend itself against Vladimir Putin’s brutal attack.
But Biden wanted to show Americans that government can be a force for good in their lives to counterbalance Donald Trump’s populism. Biden has failed to do so. No fewer than 85 percent of Americans, including 78 percent Democrats, think that the country is going in the wrong direction. There are now more Americans who have a negative opinion of Biden than Americans who have a negative opinion of former President Donald Trump.
Return
This week, Trump returns to Washington DC for the first time since leaving the White House to give a speech to a right-wing think tank. In a interview with Olivia Nuzzi from New York Magazine he said last week that he has already decided to run for re-election, but that he just doesn’t know when he will officially announce it. His divisive message will fall on fertile ground for many Americans, mellowed by the pandemic and high gas prices.
Helen Mees is an economist. She writes an exchange column with Marcia Luyten every other week.