Breitbart Business Digest: Biden and Republicans Pin Their Hopes for 2024 on Bidenomics

Republicans Should Take Bidenomics Seriously

Conservatives have treated Bidenomics as a laughing matter. That could be a strategic mistake.

When the Biden administration decided to go all in on its economic record a few months ago, this looked like a high stakes gamble. Americans were giving the Biden administration very low marks for economic stewardship, inflation was still uncomfortably high, and a recession seemed to still be inevitable.

Surveys suggested that the public cared far more about what was going wrong with the economy—namely, inflation—than what was going right—mostly, low unemployment. The Biden administration’s attempt to accentuate the positive looked doomed to fail.

Even worse, many economists believed that resolving the inflation problem would require undermining the strength of the labor market. So, even if inflation was brought down, it would likely be at the cost of millions of jobs. If layoffs became widespread and employment precarious, the public’s impression of what matters more could flip from inflation to employment. So, the Biden administration might simply wind up being unpopular for a different set of economic worries.

On the other hand, embracing Bidenomics was not necessarily a terrible strategy. If the public’s mood on the economy remained as sour as it had been, Biden was unlikely to win a second term next year. On the other hand, in the unlikely event that inflation came down with minimal damage to employment, Biden’s claiming credit for the economy might boost his prospects. In other words: Biden was always going to “own” this economy, so he might as well have bet that it would improve.

Consumer Confidence and Home Prices Are Rising

The odds of Biden’s gamble no longer look as long as they did. For starters, consumer confidence is on the rise. The Conference Board’s measure of confidence soared beyond even the most optimistic forecasts in July to the best reading since March of 2020, according to data released Tuesday. The University of Michigan’s survey of consumer sentiment rose for the second month in a row.

“Expectations for the next six months improved materially, reflecting greater confidence about future business conditions and job availability. This likely reveals consumers’ belief that labor market conditions will remain favorable,” said Dana Peterson, Chief Economist at The Conference Board.

Indeed, the expectations for the labor market over the next six months have flipped from a net negative to a net positive. The share of consumers saying they expect more jobs to be available rose to 16.4 percent, above the 14.8 percent expecting fewer jobs. Last month, the figures were 15.4 percent expecting more jobs and 16.7 percent expecting fewer.

The Case-Shiller U.S. National Home Price Index rose on a monthly basis for the fourth month in a row in May. This confirms our view that the housing market hit its bottom this spring and is poised for a recovery. On a year-over-year basis, prices are still down, but the trend is pointed in the opposite direction. This will likely give a further boost to consumer confidence. Similarly, the stock market was headed higher on Tuesday morning, headed for a twelfth straight gain in the Dow Jones Industrial Index.

Yet Inflation Is Likely to Rise Again

Unfortunately, all of this is likely to fuel more inflation. Rising home prices will mean that the shelter portion of the price indexes will not continue to be a drag on core inflation for much longer. Consumer confidence and strong incomes due to high levels of employment will fuel demand for goods and services. Indeed, the Conference Board reported an increased expectation on spending on autos and necessary services.

A resurgence of inflation would likely require the Fed to return to increasing rate hikes next year. Indeed, it would likely quash hopes for a “soft-landing” by making it clear that it really will require a sharp economic downturn to permanently tame inflation. Right now, this is the opposite of what the market expects.

None of that, however, is a certainty. Republicans pinning their hopes for 2024 on Bidenomics being a flop should at least develop a backup plan.