Facing the Cassandra cries from economic oracles about the demonic recession lurking around the corner, fuelled by skyrocketing prices of items of daily needs, it would be sheer pessimism to dwell just on the negative side and shut the eyes to the Biden administration’s accomplishments, no matter how modest, in the midst of the disruptive pandemic that plagues America.
As if the Covid pandemic was not enough, we now have the Russia/Ukraine crisis that has unleashed a global shortage of items of basic necessities and, with it, a heady spiralling of prices that have affected almost all the countries of the world. America has not been spared either.
Nevertheless, the robustness and resilience of the US economy were in full display even as the world plunged into chaos. There was some sense of hope last year when the US economy recovered and the nation’s GDP grew by 5.7%, after declining by 3.4% in 2020 at the height of the pandemic.
The economy also added 6.7 million jobs in 2021, rebounding from 9.3 million lost jobs in 2020. The average 2021 annual unemployment rate was 5.4%, about 2.7 percentage points lower than in 2020 but 1.7 points higher than in 2019. The unemployment rate was 3.6% in June 2022. That number is similar to the pre-pandemic one.
It must also be acknowledged that the US economy has recovered quite rapidly from the pandemic downturn but the recovery has also taken its toll — particularly upsetting the coordinated supply chains — and led to sharp inflationary surge.
Nevertheless, the economy is expected to slow down, as the Fed — the household name for the Federal Reserve — continues to tighten the monetary policy; the administration’s COVID economic relief measures aimed at reducing the so-called Personal Consumption Expenditure (PCE) inflation to the targeted 2% inflation by end 2023 are running out. Should inflation further become unruly and cannot be reined in, the Fed would have to resort to even more tightening of the monetary screws resulting in a further economic slowdown.
With galloping Inflation, some economic pundits have been dropping subtle and not-so-subtle hints about an impending recession. Nevertheless, the average Joe, whose wallet has been squeezed out by rising prices of basic necessities, believes that America is already in a recession.
But these are subjective feelings of the average American whose perceptions of the economy may not necessarily be based on sound analysis. Indeed, as the Fed Governor. Chris Waller, an advocate of faster rate increases, has been saying, it would be “tough to say we have a recession with a 3.6% unemployment rate”.
Wages and incomes have also risen sharply but so has consumer spending. While high inflation may have wiped out rises in incomes and spending, both these factors, strong pillars of the economy, usually tend to decline in a recession. That isn’t the case — yet.
Joe Biden began his presidency in the midst of a polarised nation and the devastating pandemic. Thus, his first task was to try to “heal” the nation, as he likes to call it, and also combat the proliferating Covid virus.
Of course, the hasty and politically reckless withdrawal from Afghanistan did not help boost his image, but then the priority shifted to containing the Covid onslaught that threatened to destroy the health and livelihood of many, and to hurt the economy Biden released a massive Covid-19 relief package and launched a nationwide vaccine roll-out.
Biden signed in March Covid-19 stimulus package, the American Rescue Plan, one of the biggest economic relief packages in the nation’s history. It was the first major legislative accomplishment of his presidency.
When Biden took over office in 2021, less than 1% of the US population was fully vaccinated. He pledged that 100 million shots would be administered in his first 100 days. A year later, roughly 63% of the U, S. population was fully vaccinated.
While the US continues to trail much of the world in terms of vaccination rates, this is by no means due to a lack of access. The vaccine has been heavily politicised and misinformation has run rampant, with many people on the right refusing to get themselves vaccinated.
Then in November 2021, Biden signed the ambitious infrastructure bill, popularly known as the Infrastructure Investment and Jobs Act, to upgrade and modernise the nation’s antiquated public works system, repairing roads and bridges, renovating ports and expanding broadband access, etc.
There are also allocations earmarked for bolstering other sectors of the economy. Revenue from tourism and travel declined sharply during the two-year pandemic with big cities presenting a desolate countenance.
New York’s Times Square, a magnet for tourists who spend not only on travel and sightseeing but also on other related industries such as gastronomy, hotels, entertainment, shopping, etc, looked during the pandemic like a deserted ghost town — a surrealistic feeling, as I experienced, while strolling along the popular landmark.
The Biden administration has unveiled a strategy aimed at reviving the tourism industry and combating the downturn in tourism revenues, besides raising the profile of the US as an attractive tourist-welcoming destination.
While President Biden has achieved results on a number of issues, he needs to communicate his achievements to the public and those whose opinion matters in open debates. Highlighting these factors is all the more important for Biden who is half way through in the second year of his term, faces Congress elections — the midterm elections — later this year.
Despite all the measures taken to control the pandemic and revive the economy, there is always that fear that things could unexpectedly go wrong when everything seems to be “under control”. A globalised world, fostering greater interconnectivity, can also face a wildfire with just a spark in any remote corner of the planet. C’est la vie!
Manik Mehta is a New York based journalist who writes extensively on foreign affairs, diplomacy, global trade and economics