Democrats fear the debt struggle, and Biden worries that the president will take the blame.
Republicans, according to President Biden, want to scuttle the debt-ceiling talks because they know that a default would undermine his reelection chances and ruin the economy. Biden is mistaken for three reasons:
- Regardless of the debt-limit discussion, the economy is already headed into a recession;
2. Biden’s chances of winning reelection are slim regardless of the state of the economy;
3. Biden has it backward. Because of his careless spending, Biden knows that a recession is imminent and hopes to blame the GOP. This is why Treasury Secretary Yellen made such a terrifying speech on the dire consequences of default.
With the American people, Biden is being untruthful. You can assume a downturn is coming when the Conference Board estimates a 99% chance of one occurring in the next 12 months, a prediction predating the debt ceiling discussion.
President Joe Biden and his Democratic colleagues blew through trillions of dollars in unneeded spending after taking office (far after the COVID-19 emergency), which sparked an overheated economy and rampant inflation. Fed Chair Jay Powell let the fire burn for far too long out of concern that rising interest rates may jeopardize his chances of reappointment. Finally, he began one of our nation’s most aggressive rate-hike cycles in March 2022.
With a 12- to 18-month lag, monetary policy changes affect the economy; we are already experiencing the effects of 10 rate rises. In general, interest rate-sensitive sectors like the housing industry are struck first, and sure enough, building starts and permits are significantly lower than a year ago.
In addition to housing, raising interest rates has resulted in three big U.S. banks failing, which has thrown doubt on credit. Due to concerns over unrealized losses on their balance sheets and deposit outflows, solvent banks are being more cautious in their lending. Thus, economic growth is slowed.
Another effect of rapid interest rate increases was a steep decline in the value of bonds and stocks last year. The bond market had one of the worst years ever, and the S&P 500 was down about 20%. Financial setbacks have an impact on expenditure as well as consumer sentiment, which has fallen.
In the following months, according to Wall Street’s top economist Ed Hyman, there will be a “hard landing” recession, with unemployment rising to 5.2% by this time next year. Hyman shared the amazement of others when the Federal Reserve lifted interest rates at its most recent meeting, despite the fragility of regional central banks. The Fed has never tightened more during a financial crisis, making things more challenging.
If Hyman and most of his contemporaries are right, a slump is imminent. Such predictions have so far proven to be inaccurate. The economy received support from a strong labor market and extra funds amassed throughout the pandemic, and Americans have continued to spend.
However, a slight downturn in the employment market and a decline in savings indicate that consumer spending may shortly decline. Recent decreases in credit card spending over the same period last year show a slowdown.
Biden is correct to be concerned about a downturn and think he will be held responsible. As Democratic strategist James Carville famously remarked, “It’s the economy, stupid.” Voters will have the president accountable because they can link excessive government expenditure to inflation.
But that’s not the only trouble he has. Voters are worried about how old he is, and he recently made history by getting the lowest approval numbers for a first-term president ever. Voters don’t like him on the economy, immigration, crime, foreign policy, and many other things, like honesty. His repeated false claims that he is lowering inflation or cutting the debt have hurt his credibility.
When the latest average from Real Clear Politics shows that 66% of Americans think we’re going in the wrong direction, it’s clear that Biden’s campaign is in trouble. Several polls show that Biden would lose if Biden ran against Donald Trump, who also has meager approval numbers. Given that the past president is still being criticized, it is surprising that the race is even close.
No, a recession would be bad for the president, but the economy isn’t the only thing pulling on this White House. Our country’s deficits and debt are a problem that could get worse. Voters know that COVID-19 caused an emergency in the United States. They didn’t mind that trillions of dollars were spent to keep the economy from falling apart during the lockdowns. But now they want us to get our money in order.
That is what Republicans in the House are trying to do. They have suggested that in exchange for raising the debt cap, we should make some minor changes. Leftists like Vermont Independent Sen. Bernie Sanders think this is a terrible idea, but most Americans would agree with them.