Biden wants to blame the debt crisis on this group but can’t avoid his own economic incompetence

President Biden has said Republicans want to scupper the debt ceiling talks because they know a default will plummet the economy and hurt his re-election bid. He is wrong for three reasons:

1. The economy is already heading into recession, regardless of the debt limit debate;
2. Biden’s re-election hopes dim, regardless of economic outlook;
3. Biden has it upside down. He knows a recession is looming, thanks to his reckless spending, and hopes to pin it on the GOP. Hence Treasury Secretary Yellen’s chilling speech about the catastrophic impact of the default.

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Biden is being dishonest with the American people. When the Conference Board puts a 99% chance of a recession in the next 12 months, a position that predated the debt ceiling debate, you can bet a downturn is coming.

After assuming the Oval Office, President Joe Biden and his fellow Democrats spent billions of dollars on wasteful spending (long after the COVID-19 emergency), triggering an overheated economy and runaway inflation. Fed Chairman Jay Powell has let the embers smolder for far too long, fearing that rising interest rates will cost him his reappointment bid. Finally, in March 2022, it began one of the most aggressive rate hike cycles in our country’s history.

Changes in monetary policy have an impact on the economy with a lag of 12 to 18 months; we are now seeing the fallout of 10 rate increases. Typically, interest-rate sensitive industries like housing are hit first and, of course, housing starts and permits are now down substantially from last year.

In addition to housing, rising interest rates led to the failure of three major US banks, which hurt credit. Solvent banks are lending more cautiously, worried about unrealized losses on their balance sheets and deposit outflows. This slows economic growth.

Another consequence of the rapid rises in interest rates is that the stock and bond markets sold off sharply last year. The S&P 500 fell almost 20% and the bond market had one of the worst years in its history. Financial losses are impacting consumer sentiment, which has plummeted, as well as spending.

Ed Hyman, Wall Street’s top-ranked economist, is now predicting a “hard landing” recession in the coming months, with unemployment soaring to 5.2% by this time next year. Hyman, like others, was shocked that the Federal Reserve raised rates at its last meeting, even as major regional banks faltered. Never before during a financial crisis has the Fed continued to tighten, making conditions even more difficult.

If Hyman and the majority of his peers are correct, we are on the verge of a downturn. So far, such predictions have been premature. A robust job market and excess savings built up during the pandemic provided the economy with a cushion, and Americans continued to spend.

But some easing in the labor market and a drop in savings suggest that the consumer may soon pull out. Indeed, a year-over-year decline in credit card spending in recent weeks signals a slowdown.

Biden is right to worry about a downturn and imagine he will take responsibility for it. As Democratic strategist James Carville so aptly put it, “It’s the economy, you idiot.” Voters make the link between too much government spending and inflation; they will hold the president accountable.

Treasury Secretary Janet Yellen warned of a potential crisis if the debt ceiling is not raised. (Tom Williams)

But that’s far from his only problem. His age is a major concern for voters, and he recently made history by achieving the lowest-ever approval ratings for a first-term president. Voters give him low marks not only on the economy, but also on immigration, crime, foreign policy and a host of other issues, like honesty. His repeated false claims that he is lowering inflation or reducing the deficit have undermined his credibility.

While in Real Clear Politics’ most recent average, 66% of the country thinks we’re on the wrong track, it’s clear Biden’s campaign is in jeopardy. Multiple polls show Biden losing in a head-to-head clash with Donald Trump, who also has remarkably low approval ratings. Considering the former president’s continued vilification, the fact that the contest is still close is remarkable.

No, a recession would obviously be bad news for the president, but the economy is just one of many setbacks for this White House. Indeed, a looming problem is our country’s deficits and debt. Voters understand that the United States has suffered an emergency because of COVID-19; they have been patient with the trillions of dollars spent to keep the economy from flailing during the shutdowns. But now they want our finances under control.

Republicans in the House are trying to do just that. They proposed that in exchange for raising the debt ceiling, we should undertake some modest reforms – which leftists like Vermont Independent Senator Bernie Sanders find impermissible but which most Americans would find reasonable.

Ed Hyman, Wall Street’s top-ranked economist, is now predicting a “hard landing” recession in the coming months, with unemployment soaring to 5.2% by this time next year.

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The GOP bill would bring discretionary government spending back to fiscal year 2022 levels and cap annual spending growth at 1% for a decade. Considering the extraordinary expenditures of recent years, which totaled more in today’s dollars than the United States spent to fight World War II, this seems like a good place to start.

Note that the deficits over the next decade without the cuts proposed by the GOP total $21 trillion, an estimate by the Congressional Budget Office that is undoubtedly conservative.

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Biden appears eager for a showdown over the debt ceiling, likely hoping he can blame the looming recession on the GOP’s push to cut spending. He and his fellow Democrats denounced the GOP plan as the work of “extreme MAGA Republicans,” as if the Limit, Save, Grow Act had been concocted in the bowels of the Capitol on Jan. 6. In fact, nearly every member of the GOP House voted in favor of the bill.

Joe Biden’s stuttering approach to negotiating the debt issue, refusing to sit down then making concessions and now reversing his position creates uncertainty which is not helpful for investors or the economy. But when it comes to creating the conditions for a recession or nullifying his re-election bid, Biden is doing just fine on his own.

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