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.
The US has announced it is sending an aircraft carrier to the waters off South America as it ramps up an operation to target alleged drug smuggling boats.
The Pentagon said in a statement that the USS Gerald R Ford would be deployed to the region to “bolster US capacity to detect, monitor, and disrupt illicit actors and activities that compromise the safety and prosperity of the United States homeland and our security in the Western Hemisphere”.
The vessel is the US Navy’s largest aircraft carrier. It is currently deployed in the Mediterranean alongside three destroyers, and the group are expected to take around one week to make the journey.
There are already eight US Navy ships in the central and South American region, along with a nuclear-powered submarine, adding up to about 6,000 sailors and marines, according to officials.
It came as the US secretary of war claimed that six “narco-terrorists” had been killed in a strike on an alleged drug smuggling boat in the Caribbean Sea overnight.
A still from footage purporting to show the boat seconds before the airstrike, posted by US Secretary of War Pete Hegseth on X
Pete Hegseth said his military had bombed a vessel which he claimed was operated by Tren de Aragua – a Venezuelan gang designated a terror group by Washington in February.
Writing on X, he claimed that the boat was involved in “illicit narcotics smuggling” and was transiting along a “known narco-trafficking route” when it was struck during the night.
All six men on board the boat, which was in international waters, were killed and no US forces were harmed, he said.
Ten vessels have now been bombed in recent weeks, killing more than 40 people.
Mr Hegseth added: “If you are a narco-terrorist smuggling drugs in our hemisphere, we will treat you like we treat al Qaeda. Day or NIGHT, we will map your networks, track your people, hunt you down, and kill you.”
While he did not provide any evidence that the vessel was carrying drugs, he did share a 20-second video that appeared to show a boat being hit by a projectile before exploding.
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Footage of a previous US strike on a suspected drugs boat earlier this week
Speaking during a White House press conference last week, Donald Trump argued that the campaign would help tackle the US’s opioid crisis.
“Every boat that we knock out, we save 25,000 American lives. So every time you see a boat, and you feel badly you say, ‘Wow, that’s rough’. It is rough, but if you lose three people and save 25,000 people,” he said.
Read more:
Survivors reported after boat strike
US destroys ‘drug smuggling submarine’
On Thursday, appearing at a press conference with Mr Hegseth, Mr Trump said that it was necessary to kill the alleged smugglers, because if they were arrested they would only return to transport drugs “again and again and again”.
“They don’t fear that, they have no fear,” he told reporters.
The attacks at sea would soon be followed by operations on land against drug smuggling cartels, Mr Trump claimed.
“We’re going to kill them,” he added. “They’re going to be, like, dead.”
Some Democratic politicians have expressed concerns that the strikes risk dragging the US into a war with Venezuela because of their proximity to the South American country’s coast.
Others have condemned the attacks as extrajudicial killings that would not stand up in a court of law.
Jim Himes, a member of the House of Representatives, told CBS News earlier this month: “They are illegal killings because the notion that the United States – and this is what the administration says is their justification – is involved in an armed conflict with any drug dealers, any Venezuelan drug dealers, is ludicrous.”
He claimed that Congress had been told “nothing” about who was on the boats and how they were identified as a threat.
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