Sagging global economy adds to America’s woes
WASHINGTON — As President Joe Biden embarks for Asia on Thursday, he’s facing a new risk at home for the economy and his Democratic Party: a global slowdown caused by Russia’s invasion of Ukraine and the pandemic shutting down Chinese cities and factories.
The world economy can’t cast U.S. ballots. But it’s a hidden force in this year’s midterm elections and could influence whether Democrats retain control of the House and Senate.
It’s an additional challenge that highlights the steep climb for Biden, whose approval ratings have plunged as prices for everyday goods in the U.S. have soared.
Several economists said they think the U.S. is insulated from the rising energy costs that threaten Europe and from China’s decline in industrial output. But there are clear spillovers as high gasoline prices continue to weigh on voters’ minds and bank accounts.
Federal officials acknowledge that global events might make it harder for inflation to fall from near 40-year highs to levels that would assure the American public. Treasury Secretary Janet Yellen said Wednesday in Germany that she believes the strong job market means the U.S. can avoid the downturn being seen around the world.
“We have a great deal of economic momentum in the United States,” Yellen said. “But you know, this is an environment that is filled with risks, both with respect to inflation and also potential slowdowns.”
Yellen’s successor as chair of the Federal Reserve, Jerome Powell, said in a radio interview for Marketplace last week that the central bank’s ability to lower inflation while keeping the economy going could depend on what happens globally.
“There are huge events, geopolitical events going on around the world that are going to play a very important role in the economy in the next year or so,” Powell said. “So the question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control.”
What’s clear is that foreign affairs and geopolitics have returned as issues that could shape the opinions of U.S. voters.
Even as the midterm races intensify, Biden is devoting his time to other world leaders — and not just Russian President Vladimir Putin and his attack on Ukraine. Biden’s trip to South Korea and Japan follows recent meetings with the heads of Italy, Greece and the members of the Association of Southeast Asian Nations. He is also meeting with the leaders of Finland and Sweden, who are seeking NATO membership, before he departs for Asia.
“Yes, geopolitics will matter for U.S. elections again,” said Doug Elmendorf, dean of Harvard University’s Kennedy School of Government and a former director of the Congressional Budget Office. “Terrorists and terrorist states have been potent, China is not becoming that much like us, and Putin has gone to war.”