Joe Biden subtly blamed Jerome Powell for the recession both men claim the US isn’t in.
“It’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Biden said Thursday, shortly after the advance read on Q2 GDP showed a second straight quarterly contraction.
The media was awash in “recession” headlines, and although I didn’t check, I’m sure the “R” word was trending on social media.
Read more: Don’t Call It A Recession
Biden’s strategy is a good one: Scapegoat Powell in the name of respecting Fed independence. It’s deflection disguised as reverence. He could do worse. Whether it’ll pacify a restive electorate paying up for groceries and gas is another matter.
Two months ago, Biden penned an Op-Ed for The Wall Street Journal explaining that a key pillar of his strategy to bring down the hottest inflation in 40 years is to take a hands-off approach to Fed policy. “First, the Federal Reserve has a primary responsibility to control inflation,” he wrote, adding that unlike Donald Trump, he won’t “demean” the FOMC.
A day later, while sitting across from Powell at the White House, Biden said that his plan to tackle inflation “starts with a simple proposition: Respect the Fed, respect the Fed’s independence.”
As I quipped at the time, that’s actually two propositions, but combining them served a purpose. By holding the Fed up as a wholly autonomous institution unburdened by the whims of an overbearing executive, Biden effectively absolved himself of responsibility for inflation. He washed his hands of it by reference to a solemn obligation to safeguard Fed independence.
Now, he’s washing his hands of an economic slowdown by referencing the actions of an independent Fed. On Thursday, Biden touted last year’s “historic economic growth” and the recouping of “all the private sector jobs lost during the pandemic crisis.”
Meanwhile, separate data showed jobless claims stuck near an eight-month high. Technically, the 256,000 initial claims recorded during the week ended July 23 represented a decline, but the prior week’s figure was revised higher by 10,000.
The four-week moving average rose to the brink of 250,000 (figure above). On Wednesday, Powell suggested the rise in initial claims may be more statistical noise than signal.
Biden went on to characterize the current conjuncture (i.e., slower growth and high inflation) as a period of “transition,” through which Americans will persevere before emerging “stronger and more secure” than ever.
The critics among you might suggest it’s a period of stagflation from which Americans will invariably emerge poorer and more irritated. If that turns out to be the case, we all know whose fault it’ll be.
As one GOP senator told Powell last month, “Clearly you are aware that you are going to be the person [who] takes the fall if inflation is not brought under control.” During the same hearing, Elizabeth Warren posed a question. “You know what’s worse than high inflation and low unemployment?” she asked Powell. “High inflation and a recession with millions of people out of work, and I hope you’ll reconsider that before you drive the economy off a cliff.”
On Thursday, Biden reiterated that his plan, at least, “is focused on bringing inflation down without giving up all the economic gains we have made.” He can’t speak for Powell, though. The Fed is independent, after all.
Read more: Jerome Powell, Professional Fall Guy
Your article reminded me of an old joke:
As the young man was preparing for graduation, his mother asked him what he was planning on doing with his life. The son looked at her sheepishly and replied, “I’ve decided to become a piano player in a wh–e house.”
His mother let out a huge sigh, “That’s a relief, I was afraid you’d become a politician.”
I’ll be here all week
H-Man, when the pandemic hit and the world shut down, the US pushed a ton of money into the economy in the form of stimulus but because of supply chain disruptions, the money could not buy what it wanted ( Costco and toilet paper). So with excessive demand and little supply, prices go up and they go up in a hurry (homes) but it is not isolated to any sector — everything goes up in price due to excessive demand. So to find or return to equilibrium, you either provide a ton of supply or weaken demand or do both. Supply is still on shaky ground notwithstanding the build in retail inventories like Walmart (which is a couple of cargo containers from having nothing from China) or restaurants that have empty seats due to a lack of servers. (the labor input is another discussion). But supply is far better than it was two years ago. The problem is tamping down on demand and the current method of reducing demand is to raise interest rates to the point you don’t buy stuff. So when you step on the throat of demand, you are also breaking the back of supply. So tell me how is this going to end “softly” when you have a mangled body and the boot remains on the throat. I suggest it may take years before the throat and back are healed and equilibrium is returned.
Unfortunately, housing might take years to return to an equilibrium- however, automobiles might not take as long. The chip shortage should ease enough by 4Q to result in an increase in the supply of new automobiles, which will then bring down prices of both new and used autos.
Anyone who absolutely needs a car right now (that can’t defer purchase until year end) is going to have to pay up significantly. I have been helping a friend, who desperately needs to replace their current car, look for a used car and the prices are still completely ridiculous.