Hollywood will be backing him en masse. The major newspapers will be rooting to put him back in the White House. And most of corporate America, in between filling in the forms for the next round of “green subsidies,” will be quietly hoping for another four years of lavish spending and protectionism to keep out all those irritating foreign competitors.
As he launched his re-election campaign this week, President Joe Biden could count on plenty of mainstream support. There is just one problem: the Federal Reserve is about to torpedo his campaign — by tipping the American economy into recession.
GDP figures for the US released Thursday showed an economy slowing down sharply. Over the first quarter of the year, output rose by 1.1 percent , a sharp deceleration from the 2.6 percent rate in the last quarter of 2022, and well below the 1.9 percent growth rate that Wall Street expected. In effect, the economy is starting to turn down significantly, and may well be in recession by the middle of the year.
It is not hard to figure out why. The Federal Reserve has raised rates sharply, taking them to 4.75-5 percent, while inflation is still running at 5 percent. An outright contraction is not completely inevitable, but it now looks more likely than not. And given that the average recession lasts for ten months, it is likely that output will be shrinking for most of the coming year.
By itself that might not do any harm. Inflation needs to be tamed, and that is very rarely achieved without recession. The trouble for Biden is that presidents rarely win re-election when output is falling. The elder George Bush lost to Bill Clinton in 1992. Jimmy Carter lost to Ronald Reagan in 1980. Richard Nixon, running from vice president, lost to John F. Kennedy in 1960. The list goes on and on.
True, Franklin Roosevelt won re-election in the 1930s when the economy was still in deep trouble, but no one blamed him for the downturn. Biden will find it a lot harder to escape responsibility. After all, his wild spending stoked inflation, which the Fed then had to control by raising interest rates, and a recession was the inevitable result. “It’s the economy, stupid,” a phrase first coined during the Clinton era, is one of the oldest cliches in the political book. It is also one of the truest. And Joe Biden may soon be the latest victim of its remorseless logic.
This article was originally published on The Spectator’s UK website.
