Biden’s Honeymoon Is Over

By Philip Klein

Thursday, May 13, 2021

 

Many conservatives have observed this week that with a poor unemployment report, inflation on the rise, a gas crisis, and the Middle East in turmoil, Joe Biden’s presidency is starting to look a lot like Jimmy Carter’s.

 

Taken literally, this is obviously premature. The Colonial Pipeline has already resumed operations. Israel and Hamas won’t be fighting at this level of intensity forever. And two concerning economic reports do not constitute a longer-term trend.

 

That having been said, this week has been an indication that the honeymoon period of the Biden presidency is coming to an end.

 

When Biden became president, he in many ways was set up for success. The economy had experienced two consecutive quarters of robust growth, and unemployment was less than half of what it was during the peak of the coronavirus downturn. COVID-19, while still raging, had peaked weeks before he was sworn in, and he inherited two highly effective vaccines that had already started being administered to more than a million people a day. Going purely on autopilot, the economy was primed for success as the vaccines became more widespread and more parts of the country reopened.

 

This past week’s events were a reminder that Biden can’t simply ride this wave to a successful presidency. Events — such as the cyberattack on the pipeline — happen that may not be directly in the president’s control but, nonetheless, have major implications on the country and end up requiring a response.

 

For all the focus on Republican squabbles over Liz Cheney, the 2022 midterms will be decided on the basis of whether voters like what Biden is doing and want to give Democrats more power to pass his agenda in 2022, or whether they dislike what he’s doing and want to give Republicans more power to block him.

 

The current view is that Biden is popular and so are his proposals. But the same was said about his former boss, Barack Obama, who enjoyed a 64-percent approval rating at this point in his presidency, only to suffer a “shellacking” a year and a half later in the 2010 midterms.

 

 

Among all the other news over the past week, the economic reports, if they become part of a trend, have significant potential to erode support for Biden and his proposals.

 

The fact that the economy gained just 266,000 jobs in April — compared to expectations of over a million — is a clear indication that giving people $300 bonuses on top of normal unemployment benefits has created a huge disincentive to work and, thus, a labor shortage. Yet the COVID-19 relief bill that Biden signed extended those benefits into September, and Democrats are already pushing for yet a further extension.

 

If subsequent reports similarly provide evidence that the enhanced unemployment benefits are holding back job growth, opposition will mount to Biden and his agenda. Remember, the Tea Party movement first developed out of a sense that people who were responsible were being forced to bail out the Wall Street bankers who blew up the economy and the people who bought houses they could not afford. Similarly, workers forced to take on more hours to pick up the slack amid a labor shortage will likely resent that their taxes are going to subsidize people to stay home.

 

In other news, the U.S. Bureau of Labor Statistics on Wednesday reported inflation rose way above expectations, with some goods increasing at rates not seen in decades. If this is a sustained problem, it is one that Americans are going to notice quickly as higher prices eat into their real incomes, and the adoring media will not be able to shield Biden from criticism.

 

While this could turn out to be a short-term problem related to various supply disruptions from COVID-19, there are a number of factors that textbook economics suggest make the country vulnerable to higher inflation. The Federal Reserve has kept interest rates at near zero and injected an unprecedented amount of money into the economy. And the federal government is spending trillions of dollars that are unnecessary to revive the economy.

 

When Biden took office, debt had already eclipsed the annual gross domestic product for the first time since World War II, following a $4.1 trillion spending binge by Washington to prop up the locked-down economy. Then, Biden decided to spend another $1.9 trillion — an amount that far exceeded the output gap and that included hundreds of billions of dollars in aid to states that have plenty of money.

 

With vaccines allowing people to resume their pre-pandemic activities (many of whom were able to accumulate savings during the lockdowns), there will naturally be a surge in demand for goods and services with or without government spending. Yet on top of the $6 trillion the government already approved, Biden is pushing Congress to add another $4 trillion in new spending.

 

Asking your party to take the plunge on trillions of dollars of tax increase (or, trillions of dollars of more deficit spending during a time when inflation indicators are rising) is a tall order, even before getting into the complications of passing everything through the parliamentary maneuver known as reconciliation. And yet, without passing these bills, Biden goes from a transformational president to somebody who got one big spending bill passed early in his presidency and accomplished nothing else.

 

It’s still early, but this week demonstrated that there’s more to a successful presidency than simply slapping on a mask and avoiding late-night tweeting.