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.
Keep up with all the latest news from the UK and around the world by following Sky News
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.
US
Donald Trump plans to hit Canada with new tariff – while warning of blanket hike for other countries
Donald Trump has said he plans to hit Canada with a 35% tariff on imported goods, as he warned of a blanket 15 or 20% hike for most other countries.
In a letter to Canadian Prime Minister Mark Carney, the US president wrote: “I must mention that the flow of Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, and Non-Tariff, Policies and Trade Barriers.”
Mr Trump’s tariffs were allegedly an effort to get Canada to crack down on fentanyl smuggling, and the US president has expressed frustration with Canada’s trade deficit with the US.
In a statement Mr Carney said: “Throughout the current trade negotiations with the United States, the Canadian government has steadfastly defended our workers and businesses. We will continue to do so as we work towards the revised deadline of August 1.”
He added: “Canada has made vital progress to stop the scourge of fentanyl in North America. We are committed to continuing to work with the United States to save lives and protect communities in both our countries.”
Mr Trump has sent a series of tariff letters to 23 countries so far, including one putting a 50% tariff on Brazil in part for the ongoing trial of its former president Jair Bolsonaro for trying to stay in office after he lost the election in 2022.
Mr Trump was similarly indicted for his efforts to overturn his election loss in 2020.
The higher rates would go into effect on 1 August.
Shortly after Mr Trump unveiled his “Liberation Day” tariffs on 2 April, there was a huge sell-off on the financial markets. The US president later announced a 90-day negotiating period, during which a 10% baseline tariff would be charged on most imported goods.
👉 Follow Trump100 on your podcast app 👈
But in an interview with Sky News’s partner network NBC News, Mr Trump said he plans to impose higher blanket tariffs on most US trade partners.
“We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%. We’ll work that out now,” he said.
He added: “I think the tariffs have been very well-received. The stock market hit a new high today.”
The US and UK signed a trade deal in June, with the US president calling it “a fair deal for both” and saying it will “produce a lot of jobs, a lot of income”.
Sir Keir Starmer said the document “implements” the deal to cut tariffs on cars and aerospace, adding: “So this is a very good day for both of our countries – a real sign of strength.”
Read more:
Trump fires tariff threats at more nations as EU ‘ready’
Palestinian activist detained by ICE suing Trump administration
The US president also teased a “major statement” he will make on Russia over its war with Ukraine.
“I’m disappointed in Russia, but we’ll see what happens over the next couple of weeks,” he said.
“I think I’ll have a major statement to make on Russia on Monday.”
Listen to The World with Richard Engel and Yalda Hakim every Wednesday
It comes as Russia’s deputy foreign minister, Sergei Ryabkov, said a new round of talks between Moscow and Washington on bilateral problems could take place before the end of the summer.
A Palestinian activist who was detained for over three months in a US immigration jail after protesting against Israel is suing Donald Trump’s administration for $20m (£15m) in damages.
Lawyers for Mahmoud Khalil have filed a claim against the administration alleging he was falsely imprisoned, maliciously prosecuted and smeared as an antisemite as the government sought to deport him over his role in campus protests.
The 30-year-old graduate student at Columbia University told Sky News’s lead world presenter Yalda Hakim being detained by ICE agents in March “felt like kidnapping”.
He described “plain-clothed agents and unmarked cars” taking him “from one place to another, expecting you just to follow orders and shackled all the time”, which he said was “really scary”.
Please use Chrome browser for a more accessible video player
Mahmoud Khalil reunites with family after release
Mr Khalil said he was not presented with an arrest warrant and wasn’t told where he was being taken.
He said the detention centre he was taken to was “as far from humane as it could be” and “a place where you have no rights whatsoever”.
“You share a dorm with over 70 men with no privacy, with lights on all the time, with really terrible food. You’re basically being dehumanised at every opportunity. It’s a black hole,” he added.
Mr Khalil said he would also accept an official apology from the Trump administration.
The Trump administration celebrated Mr Khalil’s arrest, promising to deport him and others whose protests against Israel it declared were “pro-terrorist, antisemitic, anti-American activity”.
Mr Khalil said after around 36 hours in captivity he was allowed to speak to his wife, who was pregnant at the time.
“These were very scary hours, I did not know what was happening on the outside. I did not know that my wife was safe,” he said.
Read more from Sky News:
Starmer and Macron agree ‘one in, one out’ migrants return deal
Officers who confronted ‘coward’ killer win bravery award
‘Absolutely absurd allegations’
Mr Khalil said administration officials had made “absolutely absurd allegations” by saying he as involved in antisemitic activities and supporting Hamas.
“They are weaponising antisemitism, weaponising anti-terrorism in order to stifle speech,” he said. “What I was engaged in is simply opposing a genocide, opposing war crimes, opposing Columbia University’s complicity in the war on Gaza.”
A State Department spokesperson said its actions toward Mr Khalil were fully supported by the law.
Listen to The World with Richard Engel and Yalda Hakim every Wednesday
Asked about missing the birth of his son while he was in prison, Mr Khalil said: “I don’t think there’s any word that can describe the agony and the sadness that I went through, to be deprived from such a divine moment, from a moment that my wife and I had always dreamed about.”
Meanwhile, the deportation case against Mr Khalil is continuing to wind its way through the immigration court system.
Donald Trump has praised the Liberian president’s command of English – the West African country’s official language.
The US president reacted with visible surprise to Joseph Boakai’s English-speaking skills during a White House meeting with leaders from the region on Wednesday.
After the Liberian president finished his brief remarks, Mr Trump told him he speaks “such good English” and asked: “Where did you learn to speak so beautifully?”
Mr Trump seemed surprised when Mr Boakai laughed and responded he learned in Liberia.
The US president said: “It’s beautiful English.
“I have people at this table who can’t speak nearly as well.”
Mr Boakai did not tell Mr Trump that English is the official language of Liberia.
The country was founded in 1822 with the aim of relocating freed African slaves and freeborn black citizens from the US.
👉 Follow Trump100 on your podcast app 👈
Mr Trump promised the leaders of Liberia, Senegal, Gabon, Mauritania and Guinea-Bissau a pivot from aid to trade at the surprise meeting.
He described the countries as “all very vibrant places with very valuable land, great minerals, and great oil deposits, and wonderful people”.
Read more from Sky News:
Gaza permanent ceasefire ‘questionable’, says Israeli official
Four dead and ‘many’ kidnapped after Houthi rebels sink ship
Listen to The World with Richard Engel and Yalda Hakim every Wednesday
Later asked by a reporter if he’ll visit the continent, Mr Trump said, “At some point, I would like to go to Africa.”
But he added that he’d “have to see what the schedule looks like”.
Trump’s predecessor, President Joe Biden, promised to go to Africa in 2023, but only fulfilled the commitment by visiting Angola in December 2024, just weeks before he left office.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Sports2 years agoButton battles heat exhaustion in NASCAR debut
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike