Commentary: the Biden (in)economy
As the US presidential election approaches next year, the economic rhetoric of both major political parties is also hardening. The Democrats argue that so-called "Bidenomics " is the most successful medicine for the problems of the US economy in US history. The Republicans, on the other hand, have harshly criticised Biden's economic record. Not only across the American political spectrum, but even among renowned economists and businessmen there is no consensus on this issue. Forecasts of the likelihood of the economy falling into recession in the near future still range widely between 15% and 60%.
The US economy has not only not fallen into recession yet, but has been surprisingly resilient. It has created more than 3 million new jobs in the last 12 months, including 187,000 in August. Annual inflation has been reduced by around 50% since January thanks to the Fed's rate hikes. Supply chain problems appear to have been averted and the feared chain bankruptcies have not occurred, even in the banking sector following the failures of the Californian banks. Companies are reporting decent profits and the dollar is strengthening.
However, nominal year-on-year wage growth has not kept pace with inflation and consumer spending power is falling. As a result, more and more Americans are being forced back into the labour market and the unemployment rate rose to 3.8% in August from 3.5% in July. Credit card defaults are at their highest level since 2010. The federal debt has been rising steadily and its future development is becoming hostage to political infighting in the run-up to the elections.
The latest casualty of this fight over the federal budget may well be the roughly 70,000 early child care centers. This $24 billion item is on the list of potential budget cuts and would probably mean a leap and a massive increase in unemployment for American women.
It appears that the 2024 presidential election will be decided by voters registered as independents. And not only for them, but for many Democratic and Republican voters, it will be "about the economy, you fool," as Ronald Reagan once said. The unresolved question, however, is still what kind of economy it will be about.
Miroslav Hošek, CEO of Advanced Food Products (AFP), LLC, has been in management positions in the US for 17 years