The boom is off the rose (sorry).
Shortly after President Joe Biden took office in January, economists foresaw an economic boom the president would likely ride into the 2022 midterm elections. The rollout of Covid vaccines meant the pandemic would soon be in retreat. Businesses were recovering much faster than expected. Trillions of dollars in aid had helped workers ride out the Covid downturn. Pent-up demand meant consumers were desperate to travel again, buy out the stores and party. Happy days were almost here again.
We never made it to the party. The rise of the Covid Delta variant spoiled the “Summer of Freedom.” Other things refuse to go right: Massive supply-chain disruptions persist. Consumers can’t find what they want. Companies can’t hire workers they need. Nearly one-fourth of all adult Americans remain unvaccinated, leaving ample turf for the Delta variant to occupy.
The latest job numbers illustrate the slump the Biden presidency has drifted into. Employers created just 194,000 jobs in September, less than half the total economists’ forecasted. That’s not terrible news, but there are still 6.9 million fewer workers than before the pandemic, and the portion of eligible adults either working or looking for work remains sharply depressed. Delta concerns and other murky factors are keeping people out of the labor force and that’s holding back the entire economy.
In early June, forecasting firm IHS Markit expected third-quarter GDP growth to exceed 8%. The firm downgraded that over the summer and now thinks third-quarter growth was a mere 1.4%. Shortfalls in consumer spending and business investment account for most of the decline. During the same timeframe, IHS downgraded its forecast for full-year 2021 GDP growth from 7.4% to 5.5%. (The government reports official GDP figures for the third quarter in late October.)
The economy is still recovering from the coronavirus downturn, and there doesn’t seem to be any meaningful chance of a recession. But the dropoff in performance and expectations has left consumers in a sour mood, and Biden will be their scapegoat. Morning Consult’s index of consumer sentiment shows steady improvement during the first four months of the Biden presidency, but a marked erosion in confidence since late July, as the Delta variant skunked up the country. The Conference Board’s confidence index nearly regained pre-pandemic levels in early summer, but has since fallen back to a five-year low.
Biden doesn’t seem to be solving the problems holding everything back. Since the sloppy and deadly withdrawal of U.S. troops from Afghanistan in August, Biden has expressed concern and awareness of various types of backsliding. But his administration has not been able to mount a fourth-quarter vaccination blitz or resolve parts shortages making cars and appliances scarce. His vaccine mandate for large companies probably won’t go into effect until next year—if it survives legal challenges—which leaves millions of workers or potential workers worried about getting sick in workplaces with shifting and complicated rules.
Amid all this, it’s little surprise Biden’s approval rating has sunk to 44% in the fivethirtyeight aggregate of polls. His disapproval rating is 49%, putting him “underwater.” The decline tracks the surge of Delta, and it accelerated with the chaotic Afghan withdrawal in late August.
Biden could break out of this slump with a big legislative victory, except, oh, darn, that’s not going much better than anything else. Biden’s Democrats are proving as dysfunctional as Republicans were under President Trump, with liberals and moderates at either extreme of the party battling each other to a stalemate over key Biden priorities.
Liberals want maximum spending on social welfare programs, while centrist Democrats say it’s too much. In the breach sits an infrastructure program that’s generally popular and has bipartisan support—except liberals are holding it hostage, with the ransom being a transformative expansion of the federal social-welfare system. Congressional Democrats began the fall legislative session by demonstrating incoherence on how to mash it all together, with a string of voting “deadlines” that consistently slid because the votes weren’t there to pass anything.
Democrats might work this out by the end of the year and give Biden a set of legislative accomplishments he can take into the midterm year of 2022. They might also be as hopelessly riven as they seem and fail to pass anything. This is the curse of having tiny majorities in both houses of Congress: It looks like the dominant party has control, except rogue party members essentially have veto power.
Other presidents have been in slumps similar to Biden’s. Donald Trump’s popularity was lower than Biden’s at the same point in his presidency. Barack Obama sunk nearly as low as Biden is now in the second year of his presidency. Obama recovered and won a second term. Trump didn’t. Both presidents, however, lost ground in the first set of midterm elections after they took office. If that happens to Biden, he’ll lose the Democratically controlled Congress and have to deal with newly empowered Republicans. That’s how a muddle becomes a cage match.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. You can also send confidential tips, and click here to get Rick’s stories by email.
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