High unemployment. Rising prices. Gas lines.
They’re a bad memory for Americans old enough to remember the 1970s – but they’re also likely causing a few sleepless nights in the White House, as the United States’ economic recovery from the unprecedented coronavirus recession hits some bumps.
The jolts are dampening consumer confidence, ramping up inflation fears, and helping Republicans build their case against President Joe Biden and his ambitious plans to revamp the U.S. economy with trillions in new spending.
As the 1970s show, high joblessness and rising prices the United States saw in April can be a potent political force.
Republicans crafted a “misery index” out of the two factors to attack then-president Jimmy Carter. After hitting 75% approval ratings early in his presidency, the Democrat was trounced in a 1980 landslide.
Support for Biden remains strong and U.S. equity markets remain near record highs.
The White House says there’s bound to be surprises as the United States emerges from an unprecedented pandemic.
“We must keep in mind that an economy will not heal instantaneously,” Cecilia Rouse, the chair of the White House Council of Economic Advisers told reporters Friday. “It takes several weeks for people to get full immunity from vaccinations, and even more time for those left jobless from the pandemic to find and start a suitable job.”
Rouse, speaking to reporters at the White House, said a mismatch between supply and demand due to the pandemic and the economic snap-back had pushed inflation higher but that the mismatch should prove temporary.
“I fully expect that will work itself out in the coming months,” she said.
The Federal Reserve also is betting heavily inflation will cool on its own, even as hiring picks up steam over the summer, Americans start to travel again, and the Fed keeps its massive crisis levels of support intact.
The White House wouldn’t offer a timeline for when the economy will smooth out. But it doesn’t expect a repeat of April’s weak jobs report, and recent data show applicants for unemployment benefits fell to a 14-month low.
“The trend lines continue to be positive,” a senior White House official told us on Wednesday. The White House also believes the Fed can handle what comes up, he said.
“We haven’t seen anything that is suggested that the Fed doesn’t have an ample toolkit to manage any of the risks that might present themselves.”
ROUGH WATERS AHEAD
Still, there’s more turmoil in months to come.
Republicans, divided by former President Donald Trump’s false claims that the 2020 election was stolen from him, have seized the moment to knock the foundation of Biden’s economic plans – raising taxes on the wealthy and companies.
“You won’t find any Republicans who are gonna go raise taxes. I think that’s the worst thing you can do in this economy,” House Republican leader Kevin McCarthy told reporters outside the White House, citing inflation fears and gas prices.
The U.S. Chamber of Commerce, the powerful corporate lobby group, is pushing for repeal of special unemployment payments that were a cornerstone of Biden’s campaign, and over a dozen state governors have decided to roll them back early.
With 7.5 million more people either unemployed or out of the job market altogether compared to before the pandemic, even a month or two more of weaker-than-expected job growth and rising prices would up the pressure on Biden and the Fed.