A mixed-bag economy
With news the economy shrank for the second quarter in a row — an informal marker of a recession but not the official test — voters are hearing two competing views of the economy.
Republicans sound as if we’re back to the 1970s, when the so-called misery index (inflation plus unemployment) reached about 20 percent. (Today, it would be about 13 percent.) They point out gas prices have gone through the roof, inflation is at a 40-year high, and wages have not kept pace. They argue that President Joe Biden misjudged inflation (which the Federal Reserve and most economists did, too) and was slow to react. Now, we might be in a recession.
The White House view is that the economy is “softening” as expected but that unemployment remains historically low. “People who want a job can get a job,” Cecilia Rouse, chair of the Council of Economic Advisers, told me and a small group of reporters Thursday. Consumer spending is still increasing (albeit at a slower pace) and inventories have returned to normal levels. Rouse says while the administration knows the economy must “cool,” a record-low unemployment rate sure doesn’t seem like a recession.
Is the White House right or is the GOP? Yes. The economy is a mixed bag. If you have gotten back to work (maybe in a better-paying job) without a long commute, you might be doing better. If you kept your job during the pandemic, but your rent went up and you now pay a fortune in gas to get to work, you’ve lost ground in the past year or so.
Republican critics, independent economists (with a few exceptions) and the administration all misjudged the risk of inflation because we had never before had a total shutdown and restart, followed by a war that has disrupted the supply of food and gas. It is frankly ridiculous to think the administration could have found exactly the right amount of stimulus (big enough to prevent suffering but not so big as to aggravate inflation). Instead, the administration erred on the side of supporting the people and businesses that were marooned by the pandemic.
Politicians will argue from here to the midterms and beyond about who is to blame for inflation. But if Biden gets the blame for inflation, he should also get credit for jobs and falling gas prices. Even so, he really doesn’t deserve all the credit or the blame for the economy. Both sides exaggerate the extent of Biden’s control over it. He can’t spin the dials to create the perfect balance between jobs and inflation — although lowering tariffs and increasing immigration would tamp down on inflation.
Instead of deciding whom to blame for inflation, voters should consider how each party wants to address the prospect of a recession. Republicans still push supply-side tax cuts (and weirdly, tax hikes on poorer people). Democrats want tax credits and cuts for middle- and low-income workers, plus a minimum corporate tax and greater investment in clean energy, infrastructure and education to produce steady growth.
Whichever path you favor, keep in mind: No single president (or Congress) is solely responsible for good times or bad, let alone an economy that’s both good and bad.