It’s the inflation, stupid: Why a ‘vibecession’ is hurting Biden – despite an economy which is the envy of Europe
In the circumstances, the numbers could hardly look much better.
A year or two ago, the conventional wisdom was that America was facing a terrific recession.
Instead, according to the latest data from the International Monetary Fund, the US has outperformed pretty much every other major economy in the world (including China).
In its latest World Economic Outlook report – the most closely-watched set of international forecasts – it upgraded the US more than nearly every other major economy.
From a European perspective, there is much to be jealous of about America’s recent performance (most European nations, including the UK, saw the IMF downgrade their growth forecasts).
Yet here’s the puzzle. Despite this comparatively strong economy, despite having seen a lower peak in inflation than most European nations (especially the UK), American consumer confidence remains in the doldrums.
It’s not just Europeans who find this perplexing. So too does the White House.
The White House worries it’s not getting credit for the strength of the economy with voters. Pic: Reuters
They pumped cash into the manufacturing sector at the very moment it needed it, via a series of expensive programmes including the CHIPS Act (to bring semiconductor manufacturing back home) and the Inflation Reduction Act (to encourage green technology firms to set up factories in the US).
The idea was that from the depths of the pandemic, America would “build back better” – that Biden would emulate Franklin D Roosevelt and his New Deal of the 1930s.
And most conventional statistics suggest that strategy is bearing fruit. Manufacturing employment is rising; factories are being constructed at the fastest rate in modern history. And gross domestic product – the most comprehensive measure of output – is rising. Unlike in the UK or Germany, there was no recession.
So why, then, is consumer confidence so weak? Why are Biden’s approval ratings – the key polling benchmark for the US leader – lower than pretty much any of his predecessors at this stage in their terms?
Travel around Pennsylvania, as we have done over the past few days, and you encounter all sorts of explanations.
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It’s the inflation, stupid
Food banks are getting busier; and while some businesses are beginning to see that federal money trickling down, many of the programmes are still at the approval stage. The money hasn’t arrived yet.
But, above all else, you hear one recurrent answer: it’s the cost of living. It’s food prices, it’s gas prices, it’s rents.
And there’s also a big gap here between life through an economic prism and the life lived on Main Street in places like Bethlehem PA – an old steel town trying to reinvigorate its economy.
Talk to an economist and they’ll remind you that inflation – the rate at which prices are changing over the past year – is finally beginning to drop. But while this is statistically true, it misses a couple of pragmatic realities.
First, prices aren’t going down; they’re just rising a bit less quickly than they were before. The squeeze hasn’t gone away.
Second, while economists often fixate on the change in the consumer price index over the past year (3.5% in March), what the rest of the population notices is the change in prices over a longer period.
Over the past two years prices are up around 9%. Over three years, they’re up 18%.
In other words, the explanation for the “vibecesssion”, as economists have christened it (there’s no formal recession but the vibes feel bad), might actually be exceptionally simple: It’s the inflation, stupid.
Summing up what voters care about, an adviser to Bill Clinton once said ‘it’s the economy, stupid’ during a 1990s US election race. Pic: Reuters
In Pennsylvania, perhaps the most critical of all the swing states in the US, the question is whether Donald Trump can capitalise on this disaffection to win over the citizens who abandoned him last time around.
In the meantime, the Biden White House is biding its time, hoping that those New Deal economic textbooks they followed when pumping cash into the economy are really to be trusted.
Rishi Sunak is “absolutely right” to hold off calling an election because it gives voters time to see “the plan is working”, the foreign secretary has said.
Lord Cameron told Sunday Morning With Trevor Phillips that the prime minister is a “good man, doing a great job at a difficult time” after a bruising set of results at the local elections.
Asked what advice he’d give Mr Sunak to close the 20-point gap in the polls with Labour, the former Tory leader said he’d tell him to “stick to the plan” – pointing to inflation coming down and the economy exiting recession.
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He added: “The longer actually we have between now and the election, the more you’re going to see the plan is working.”
The next election must be held by 28 January 2025.
Mr Sunak has previously said he intends to call it in the second half of this year, but that has not stopped speculation he could go earlier, possibly holding it in the summer.
Lord David Cameron speaks to Sky’s Trevor Phillips
Lord Cameron stressed he is “not in charge of election timing”.
But, he added, Mr Sunak “said the second half of the year and I think that’s absolutely right, because you can see the economic plan is working”.
He claimed Labour is “desperate for the election now because the longer we have between now and the election, the more you’re going to see the plan is working”.
He also insisted Mr Sunak is “definitely” the right person to be leading the party – as he ruled out a possible return to Downing Street to help the Conservatives reverse their electoral fortunes.
Asked about the prospect of going for the top job again, the former prime minister said: “No, no. I am now foreign secretary. I sit in the House of Lords. I’m not in the House of Commons. I’m part of Rishi’s team.
“That is what I’m interested in doing. And that’s what I’m going to do.”
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Election ‘not a foregone conclusion’
If Labour wins the next election, it would end 14 years of Conservative governments under five prime ministers, including Lord Cameron – who stepped down after the UK voted to leave the European Union.
Mr Sunak last week admitted he might not win when the nation goes to the polls, but suggested the UK is on course for a hung parliament. He later insisted the outcome of the election is “not a forgone conclusion”.
Most polls predict Labour is heading for a landslide victory like that secured by Tony Blair in 1997.
In the local elections, Labour won 1,158 seats in the 107 councils in England that held ballots on 2 May, an increase of more than 232.
The Liberal Democrats won 552 seats, up nearly 100, while the Tories came in third place on 515 seats, down nearly 500.
SBM Intelligence emphasized that detaining foreign business officials could make it challenging for the country to attract investors.
Politics
Natalie Elphicke says claims she lobbied justice secretary over ex-husband’s trial are ‘nonsense’
Accusations MP Natalie Elphicke lobbied the justice secretary in 2020 to interfere in her then-husband’s sex offences trial are “nonsense”, her spokesperson has said.
It is claimed the Dover MP, who recently defected from Conservative to Labour, approached Sir Robert Buckland when he was lord chancellor and justice secretary before the hearing of Charlie Elphicke’s case.
The Sunday Times reported that she allegedly told Sir Robert that it was unfair the case was the first to be heard at Southwark Crown Court after the COVID lockdown and that it was being overseen by Lady Justice Whipple.
One person present viewed her comments as a bid to have the case moved to a lower-profile court to spare her partner public scrutiny, while another saw it as an attempt to replace the senior judge, according to the newspaper.
Charlie Elphicke, pictured in 2020. Pic: PA
Sir Robert reportedly told the paper he rejected her plea, suggesting his intervention could undermine the constitutional doctrine of the separation of powers between parliament and the judiciary.
“She was told in no uncertain terms that it would have been completely inappropriate to speak to the judge about the trial at all,” Sir Robert said in a statement.
In a statement responding to the claims, also published in The Mail on Sunday, a spokesman for Ms Elphicke said: “This is nonsense.
“It’s certainly true that Mr Elphicke continued to be supported after his imprisonment by a large number of Conservative MPs who had known him for a long time, including some who visited him and independently lobbied on his behalf, which was nothing to do with Natalie.”
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A Labour Party spokesman said Ms Elphicke “totally rejects that characterisation of the meeting”.
“If Robert Buckland had any genuine concerns about the meeting, then he should have raised them at the time, rather than making claims to the newspapers now Natalie has chosen to join the Labour Party,” the spokesman said.
Sir Robert Buckland
Ms Elphicke’s former husband and predecessor as MP for Dover, Charlie Elphicke, was convicted in 2020 of sexually assaulting two women and jailed for two years.
She ended the marriage after his conviction but supported his unsuccessful appeal, saying Mr Elphicke had been “attractive, and attracted to women” and “an easy target for dirty politics and false allegations”.
Ms Elphicke allegedly also tried to secure him better prison conditions, asking for more comfortable pillows, The Sunday Times reported, something she also denied.
Read more from Sky News:
Natalie Elphicke apologises for supporting sex offender ex-husband
What happens when an MP defects to another party?
Following news of Ms Elphicke’s defection this week, Labour MPs raised concerns about the decision to admit her to the party, citing her comments about Mr Elphicke’s case and his victims.
In a statement on Thursday, she said she condemned “his behaviour towards other women and towards me”, adding it was “right that he was prosecuted” and she was “sorry for the comments that I made about his victims”.
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