Biden’s economic dream is coming true – but how long can he sustain it?

President Joe Biden is enjoying the economic recovery of his dreams, with slowing inflation, a still-hot job market and diminishing recession risks.

Now he just needs to figure out how to keep it that way.

A White House that has bet Biden’s political future on the economy’s resilience — so much so that it’s branding it with the president’s name — received the latest encouraging sign on Wednesday that its strategy is paying off, with new data showing a sharper than expected slowdown in consumer costs.

The measure is a major reversal of fortune for Biden, after two years of battling soaring inflation and accusations that his program contributed to the pain. But it’s just the latest in a series of economic developments that have bolstered the administration’s confidence in its ability to put the United States on a glide path without plunging it into a downturn first.

“Despite repeated predictions that recession is imminent, the U.S. recovery is strong,” National Economic Council Director Lael Brainard said in a speech at the Economic Club of New York shortly after the data was released. inflation on Wednesday. “The economy defies predictions that inflation would not fall absent significant job destruction.”

Yet even as fears of a disastrous recession fade, Biden and his allies are already turning their attention to a series of smaller hurdles that threaten to dampen the White House’s political narrative. There remains a mistrust in the ranks that taking a full victory lap on the economy could spell political unrest down the road – and that the administration lacks the tools to deal with a serious setback should one occur. here the elections in 16 months.

“Good news is good news for the White House at this point,” said Tobin Marcus, Biden’s former economic adviser. “That doesn’t rule out the possibility of things going worse than they hoped.”

The administration is preparing for the massive resumption of student loan repayments this fall, which could send a financial shock to millions of households who benefited from the three-year reprieve. Congressional Republicans, meanwhile, are already signaling their intention to fight a budget battle that could shut down the government and further undermine the country’s political stability. And then there’s the Federal Reserve, which remains determined to raise interest rates in an effort to reduce inflation to 2%, despite warnings that it could end up tipping the United States into recession.

“Do we want to sacrifice the economy at the altar of a 2% inflation rate?” Mark Zandi, chief economist at Moody’s Analytics, said earlier this week. On Wednesday, he tweeted that the latest inflation report served as yet another reason to “rethink” the Fed’s strategy.

Biden allies insist these are each manageable items on their own. But the White House is already struggling to convince Americans that the economy is, in fact, good at a time when all major indicators are moving in the right direction. And together, these looming hurdles represent a reminder that Biden and his team can exercise only limited control over the trajectory of the economy heading into 2024.

“There’s going to be a cooling because economies are cooling – they can’t grow endlessly,” said a White House economic adviser, who spoke on condition of anonymity. “The only thing that worries me is the shock that I cannot predict.”

Biden himself has shown some restraint in how he frames the economic recovery, even amid a lengthy road trip to claim credit for tougher conditions across the country. In an otherwise triumphant June speech intended to formally lay out his bidenomic agenda, Biden concluded by warning, “I am not here to declare victory.

He repeated the warning in South Carolina last week, warning that “we still have a lot of work to do.”

Inside the administration, aides described their goal of dispelling voters’ existing doubts about the state of the economy rather than promising a rosy future. The White House has long harbored deep frustrations with media coverage that officials see as obsessed with the threat of a recession, even as the underlying data has shown consistent signs of strength — a dynamic they partly blame for the public’s gloomy view of how Biden has handled the economy.

“We’ve been hearing from the pessimists that a recession is looming for more than a year,” said a White House official, who spoke on condition of anonymity to describe the outlook inside the building. “Obviously there will always be bumps in the road, but we have faced unexpected bumps and our economic recovery has continued.”

The administration has sought to soften some of the impending bumps it can foresee. After the Supreme Court overturned Biden’s attempt to write off billions of dollars in student debt, the White House rolled out a new strategy that will ease repayment penalties for financially vulnerable borrowers over the next year.

The “on ramp” policy will not prevent the anticipated drop in spending by borrowers, which could have repercussions on the economy and slow its progress. But it could help spread some of the impact over several months, rather than hitting everything at once.

“The hardship for households in some cases is going to be very real,” Marcus said. “From a macro perspective, I don’t see this as the thing that’s tipping us into recession.”

Biden also began targeting individual Republicans on economic issues. After navigating a potentially disastrous debt ceiling showdown, it is now poised to shield itself from the political fallout of a potential government shutdown. In particular, the White House has highlighted GOP lawmakers who have opposed its policies — even as they tout how their districts have benefited.

But beyond that bullying pulpit, Biden has few major levers left to stabilize the economy if it falters more significantly, especially since much of the pandemic aid that s has proven to be a critical financial cushion in recent years expires.

Although the White House has refrained from commenting on the Fed, its aides and allies have been closely watching a rate hike campaign that many privately fear is going too far in its attempt to bring inflation down.

There is also some trepidation about how long the economy can maintain its pace, and whether even small signs of a cooling around this time next year could unravel all the work officials are currently doing to sell off. voters on Biden’s economic record.

But for now, Biden has weathered two rocky years and emerged with a strengthening economy. Voters can say they don’t feel it yet. Still, it’s a framework the White House is increasingly willing to adopt — for as long as it lasts.

“The story of nearly every recession in modern American history is something bad that happened, and it was something bad that we didn’t see coming,” said economist Justin Wolfers. at the University of Michigan. “What could happen by 2024? A shit of bad stuff. You know what else could happen? Good things.”

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