Voices: This week could put Joe Biden’s re-election pitch in a bind
Last week, President Joe Biden announced his re-election campaign largely on the premise that he wanted to “finish the job” he started when he took office during a pandemic and the ensuing economic shockwaves.
Since then, he’s tried to project a message to the American public that he shepherded the nation out of the worst of the pandemic, even as people continue to die from Covid-19, and that he has led the country to a new era of economic prosperity, despite inflation sticking in the front of people’s minds.
Mr Biden is clearly hoping to create a Democratic mirror image of Ronald Reagan’s 1984 “Morning in America” re-election campaign, when the incumbent campaigned on the nation exiting the malaise of the 1970s and entering an era of renewal and optimism.
But this week could easily throw a wrench into Mr Biden’s efforts to make that case. On Monday, Treasury Secretary Janet Yellen sent a message to Congress which warned that the United States could hit its debt ceiling as early as the beginning of June. Mr Biden has in turn teed up a meeting with House Speaker Kevin McCarthy and other congressional leaders to begin negotiations to avoid a default on the country’s credit in earnest.
Ultimately, Mr Biden and Mr McCarthy will most likely come to some kind of agreement on the debt ceiling. But the exact nature of such a final deal, as well as how long negotiations will take, could create ripple effects and market uncertainty, which could imperil the nation’s economic outlook.
Then, on Wednesday, Federal Reserve Chairman Jerome Powell announced that once again, the Federal Reserve would raise interest rate for the 10th consecutive time. This in turn came after US regulators seized First Republic Bank and sold it to JPMorgan Chase, which followed the collapse of Silicon Valley Bank earlier this spring.
But Democratic senators fear that another interest rate hike could come at the expense of jobs.
“Chairman Powell has raised interest rates at an extreme level, there's been nothing like it in modern history,” Senator Elizabeth Warren of Massachusetts, an ardent critic of Mr Powell, told me on Wednesday. “He risks putting millions of people out of work and tipping our economy into a recession.”
An economic recession could cost Democrats not just the White House but could also hurt Democratic senators in Republican states – such as Senator Sherrod Brown of Ohio, the chairman of the Senate Banking Committee, who is running for a fourth term.
Mr Brown told me that he thought that Mr Powell had not adequately addressed the true cause of rising prices.
“I think part a big part of inflation has been corporations taking advantage of the gaps in the supply chain and using it to raise prices way more than their costs have gone up,” he said. Mr Brown said Mr Powell should pay attention to the Federal Reserve’s dual mandate, which requires not only that it keep inflation low but also focus on keeping employment at a maximum level.
Ohio’s days as a perennial swing state have long since passed, with Donald Trump winning the state twice, which could put someone like Mr Brown in trouble.
As of right now, though, the concerns are still hypothetical. But the Bureau of Labor Statistics will release its latest jobs numbers on Friday, which will show how many jobs were added last month.
The latest numbers will signify if the central bank’s continued interest rate hikes have indeed cooled the labour market, which could provide more incentive for Mr Powell and the Federal Reserve to pump the brakes even more on interest rates. But if the number of jobs added is too meager, that too could affect economic confidence even as fuel prices have dropped.
All of this could risk torpedoing Mr Biden’s case that he plans to make and his ability to tell the American public that he has been a responsible steward of the economy.