WASHINGTON – President Joe Biden on Monday hit out at political opponents, including former President Donald Trump, for bolstering the US economy, which was recovering rapidly during his first six months in office.
But some economists worry that the administration’s aggressive efforts to spur economic growth could hit a recession next year.
Speaking at the White House on Monday morning, Biden reminded listeners of the economic disaster predictions that his opponents had insisted would follow his election as president.
Without naming him, Biden referred to his predecessor, citing his prediction that if Biden becomes president, the country will “experience a depression the likes of which we have never seen.”
3 million new jobs
Pointing out that the current reality of the US economy is quite different, Biden said, “We have gone from 60,000 jobs per month to 60,000 jobs every three days — more than 600,000 jobs per month since I took office. 3 Over a million new jobs all told. I’m told this is the fastest growth at the moment in the history of any administration.”
Additionally, he pointed out that the growth rate of the US economy was currently higher than in nearly 40 years.
“And now, forecasters have doubled their estimates for growth in the economy this year to 7 percent or more,” he said. “In fact, the US is the only developed country in the world where growth projections today are stronger than they were before the pandemic hit.”
deserve some credit
Even observers who do not necessarily agree with Biden on economic policy agree that the president can take a substantial portion of the credit for the economy’s rapid rebound.
“I think he can rightly take credit for starting an effective vaccination program,” said Desmond Lachman, a senior fellow at the conservative-leaning American Enterprise Institute. “This means people can go back to work and all industries that have been hit hard by the pandemic can come back.”
But when it comes to economic policy, it is not clear how much of the current rebound is due to administration action and a natural combination of delays in consumption by consumers and businesses across the country ramping up to get back at the same time. . For some analogy to the general.
right place right time
“There is no doubt that Biden and the administration, more broadly, are the beneficiaries of being in the right place at the right time,” said David Wilcox, a senior fellow at the Peterson Institute for International Economics.
However, Wilcox said, “Biden and his administration have done some things that have certainly helped accelerate the pace of economic recovery. Aggressive efforts to distribute a vaccine are certainly number one on that list.” More broadly, the reinforcement of science-based approaches to public health, and the importance of respecting public health guidance, may have made a difference to the margins.
“Then, finally, a big factor to keep in mind is the enactment of the US recovery plan,” he said, “a historically large injection of stimulus – it will ultimately total $1.9 trillion – some of which will be online very quickly.” went.”
danger of overheating
It is this last factor, the excitement, that worries Lachman and many conservative commentators.
Even before Biden took office, the government had spent nearly $4 trillion on a variety of pandemic-related tasks, including direct grants, the Paycheck Protection Program, and helping agencies respond to growing demand for services related to pandemic response. additional funds were involved. In March, that number rose to nearly $6 trillion, when Biden signed off on a $1.9 trillion US rescue plan.
It all comes on top of the Federal Reserve’s promise to keep interest rates low, almost certainly until next year.
higher cost proposed
In his remarks on Monday, Biden said it is essential for a sustained recovery that Congress passes another major initiative, this one related to infrastructure, that the government has committed to another $1 trillion or more in spending. Will do
“He’s really supercharging the economy,” said Lachman of the American Enterprise Institute, “and he’s doing it at the same time the Fed has its pedal to the metal.”
Like many economists, including former Clinton administration Treasury Secretary Lawrence Summers, Lachman says he worries that injecting excessive cash into the economy will drive up wages and prices that will force the Federal Reserve to raise interest rates sharply. , which can stimulate others. recession.
“It may look great in 2021, but the question is, what will it look like in 2022?” Lakshman said. “We could very well run into a hard economic landing.”
The wildcard in all of these considerations is the future path of the pandemic. Cases are rising rapidly in the United States, albeit from low levels. Much of the progress the country has made could be reversed if the more infectious delta type of the disease continues to spread, particularly in unvaccinated populations, or if a vaccine-resistant variant arises.
As if to warn the president of the dangers of an economic rush, the stock market experienced its biggest single-day drop in two months on Monday, with the Dow Jones Industrial Average dropping 726 points, or nearly 2% of its value. Analysts attributed the dramatic decline to public concern about the rising number of COVID-19 cases.
Much of that fall was recovered on Tuesday afternoon, but one message was clear: When it comes to economic recovery, no one really knows whether the administration or the virus will have the last word.