The measure is a major reversal of fortune for Biden after two years of battling spiraling inflation and allegations that his agenda had contributed to the pain. But it is only the latest in a series of economic developments that have boosted the administration’s confidence that it can put the United States on a downward path without first plunging it into a recession.
« Despite repeated forecasts that a recession is around the corner, the US recovery is robust, » National Economic Council director Lael Brainard said in a speech at the Economic Club of New York shortly after the data was released. on inflation Wednesday. « The economy is defying predictions that inflation would not decrease in the absence of significant job destruction. »
Yet even as fears of a disastrous recession fade, Biden and his allies are already turning their attention to a number of minor roadblocks that threaten to dampen the White House’s political narrative. There remains mistrust within the ranks that taking a full-fledged victory lap on the economy could invite political trouble down the road and that the administration lacks the tools to deal with a major setback if it occurs between now and elections in 16 months.
“Good news is good news for the White House at this point,” said Tobin Marcus, a former economic adviser to Biden. « It doesn’t rule out the possibility that things are going to be more difficult than they’re hoping. »
The administration is preparing for a mass resumption of student loan payments this fall, which could send a financial shock to millions of families who benefited from the three-year reprieve. Republicans in Congress, meanwhile, are already signaling plans to wage a budget battle that could shut down the government and further shake the nation’s political stability. And then there’s the Federal Reserve, which remains determined to raise interest rates in a bid to bring inflation down to 2%, despite warnings it could end up plunging the US into a recession.
« Do we want to sacrifice the economy at the altar of the 2% inflation rate? » Mark Zandi, chief economist at Moody’s Analytics, said earlier this week. On Wednesday, he tweeted that the latest inflation report served as yet another reason to « rethink » the Fed’s strategy.
Biden’s allies insist these are manageable elements each on their own. But the White House is already struggling to convince Americans that the economy is, indeed, good at a time when all the leading indicators are moving in the right direction. And together, those looming hurdles are a reminder that Biden and his team can only exert so much control over the path of the economy in the run-up to 2024.
« There will be a cooling because economies just cool — they can’t grow indefinitely, » said a White House economic adviser, who was granted anonymity to speak freely. « The only thing I worry about is the shock I can’t predict. »
Biden himself has shown some restraint in his framing of economic recovery, even in the midst of a long road tour to claim credit for strengthening conditions across the country. In an otherwise triumphant June speech meant to formally outline his Bidenomics agenda, Biden closed by warning, « I’m not here to declare victory. »
He repeated the disclaimer in South Carolina last week, warning that « we have a lot more work to do. »
Inside the administration, aides have described their focus on easing voters’ existing doubts about the state of the economy rather than promising a rosy future. The White House has long harbored deep frustrations with media coverage that officials see as haunting the threat of recession, even as the underlying data has shown consistent signs of strength — a dynamic they blame in part on poor public insight into how Biden has managed the economy.
« We’ve heard doomsayers saying that a recession has been around the corner for more than a year, » said a White House official, who was granted anonymity to describe what’s next inside the building. « Obviously, there will always be bumps in the road, but we’ve faced unexpected hurdles and our economic recovery has moved forward. »
The administration has tried to iron out some of the impending hurdles it can foresee. After the Supreme Court rejected Biden’s offer to cancel billions of dollars in student debt, the White House has rolled out a new strategy that will ease repayment penalties for financially vulnerable borrowers over the next year.
The « on ramp » policy will not prevent the expected decline in borrower spending which could spill over into the economy and slow its progress. But it could help spread some of the impact over several months, rather than hitting it all at once.
« The hardships for families in some cases will be very real, » Marcus said. « Macroeconomically, I don’t see that’s the thing driving us into recession. »
Biden has also begun targeting individual Republicans on economic issues. After going through a potentially disastrous debt ceiling showdown, he is now moving to insulate himself from the political fallout of a potential government shutdown. In particular, the White House highlighted GOP lawmakers who have opposed his policies, even as they publicize the ways their districts have benefited from them.
But beyond that bullying pulpit, Biden has few major levers left to stabilize the economy if it falters more significantly, especially as much of the pandemic aid that has proved a key financial cushion in recent years expires.
While the White House has refrained from commenting on the Fed, aides and allies having a close eye on a rate-hiking campaign, many privately fear it will go too far in its bid to lower inflation.
There’s also some trepidation about how much longer the economy can keep its pace and whether even small signs of cooling around this time next year could unveil all the work officials are doing now to sell voters on the economic record. by Biden.
But for now, Biden has weathered two years of pitfalls and emerged with a strengthening economy in hand. Voters can say they don’t feel it yet. Still, it’s a framework the White House is increasingly willing to embrace, while it lasts.
« The story of almost every recession in modern American history is that something bad happened, and it was something bad that we didn’t expect, » said Justin Wolfers, an economist at the University of Michigan. “What could happen between now and 2024? A ton of bad stuff. You know what else could happen? Good stuff. »