Americans received welcome economic news on August 5, 2022, as the July Jobs Report (Bureau of Labor Statistics) indicated a whopping 528,000 jobs were added during the month.  Also, the unemployment level dipped to 3.5%, matching the lowest level in 50 years that was achieved in February of 2020.  Let’s take a look at how this solid jobs report squares with the claims of Republicans and the conservative media that the Biden and the Democrats have ruined the US economy and thrown it into recession.   

Take a look at the attached graph that shows every US recession since 1950 and depicts how the levels of unemployment changed during each. In all 12 recessions since 1950), unemployment jumped significantly from the onset of the recession.  There has never been a recession where the levels of unemployment didn’t increase significantly during the recession.

 

The July Jobs Report is thus further evidence that Republican leaders, Fox News, and the conservative media jumped the gun on declaring a recession a week or so ago.  It’s a sad commentary that these actors are weaponizing economic data and misinforming the public solely in order to win elections this coming November.  Painting Biden as a disaster on the economy is the imperative, and these actors are not about the let the facts get in their way.  Unfortunately, in the coming months, we can expect more of the same.  Let me provide some background and then describe the additional attacks we can expect from them. 

As you probably know, the Federal Reserve (Fed), in order to tame the 40-year high rate of inflation (9.1%), has moved aggressively to raise the fed funds rate by 2.25 percentage points in less than 6 months (.25 on March 17, .5 on May 5, .75 on June 16, and .75 on July 27).  The Fed has effectively used this strategy in the past to slow down the economy and help tame inflation.  And, given the very strong July Jobs Report, most economists expect the Fed to continue raising interest rates in the coming months. The rate increases will eventually have the effect of slowing the economy and decreasing the rate of inflation.  Historically, interest rate hikes don’t produce immediate effects; rather, it can take several months for inflation rates to decline.  Also, raising interest rates is precarious: if they are increased too much and/or too fast, the economy can be thrown into recession.  And, probably more important for average Americans, interest rate hikes by the Fed make it harder to pay off credit card debt, buy a home, and make ends meet.  In short, raising interest rates is going to be temporarily painful for Americans.  But, if inflation is to be tamed, there is no way to avoid this temporary hardship. 

So, what does this mean in terms of attacks by Republican leaders and the conservative media?  First, because of rising interest rates, Biden will be attacked for making it even harder for Americans as they struggle to pay bills, buy homes and cars, and manage credit card debt.  Second, inflation rates probably won’t decline much in the near term, and could possibly increase a bit.  Biden will be attacked for causing the problem to get worse.  Third, as higher interest rates begin to have the desired effect, job growth is likely to decline.  Republicans will attack Biden for any increases in the unemployment rate.  And, finally, it’s possible that the Fed’s interest rate hikes will go too far and throw the economy into a recession.  Again, Biden will be blamed.  In short, the economy is likely to slow in the months leading up to the November midterms.  Monthly Jobs Reports are likely to be much more modest in terms of job gains, and the unemployment rate may tick up.  Inflation will probably still be high in November (e.g. Trading Economics forecasts that inflation will be 8.5% in 3rd quarter of 2022, and 7.3% in the 4^th quarter).  And, in the meantime, many Americans are going to struggle with paying bills, managing credit card debt, and buying homes or automobiles.

Don’t expect for one minute that Republican leaders and the conservative media will acknowledge that the Fed is independent of the President and that he has limited authority when it comes to combating inflation.  Instead, any negative fallout from the Fed’s actions will be blamed on Biden. 

Don’t expect for one minute that Republican leaders and the conservative media will acknowledge that high inflation is occurring in countries around the world.  As a result of the Covid pandemic, virtually every country suffered devastating levels of unemployment, GDP decline, inflation, and loss of human life.  Also, the pandemic and economic fallout resulted in extensive supply chain issues that disrupted manufacturing and made goods unavailable and/or more expensive.  Instead of acknowledging these realities, they will argue that Biden and the Democrats are entirely to blame because of reckless and excessive spending.   

Don’t expect for one minute that Republican leaders and the conservative media will acknowledge the necessity–despite inflationary effects—of stimulus packages adopted around the world. While these stimulus packages and government interventions served their purpose of helping millions of people, businesses, and other entities in desperate need, an unfortunate side effect of all this stimulus relief has been inflationary pressures in most countries of the world (see Pew Research Center report of June 15, 2022).  

And, when it comes to federal spending, don’t expect for one minute that Republican leaders and the conservative media will acknowledge that under Trump, more than $3.2 trillion in stimulus relief was provided (CARES Act, Families First Coronavirus Response Act, Consolidated Appropriations Act).  The appropriations for these measures were still being spent in 2021 and 2022.  Also, total federal debt increased by more than $6.7 trillion (36%) during Trump’s term in office.  Biden is responsible for The American Rescue Plan Act ($1.9 trillion), and the Infrastructure Act ($1.2 trillion).  Thus, if we are to argue that massive federal spending is to blame for inflation, the Trump Administration shares this blame.  To corroborate this conclusion, see, “High inflation is the bill coming due for Trump and Biden’s stimulus that kept us out of a Great Depression” Business Insider, November 10, 2021. 

Don’t expect for one minute that Republican leaders and the conservative media will acknowledge the inflationary effects of Russia’s war with the Ukraine.  

Rather than attacking, blaming, distorting the facts, and being preoccupied with gaining and maintaining control, why can’t we work together on common interests?  America should be celebrating the robust job growth and historically low levels of unemployment.  Why can’t we give credit to Trump for adding 6.5 million jobs in his first three years (before Covid-19 hit), and why can’t we give Biden credit for adding 9.5 million jobs in the first year and a half of his presidency?  Why can’t we give them both credit for bringing unemployment down to record lows?   

It’s not impossible to work together.  Congress just passed and the President just signed the CHIPS Act (64-33 in the Senate, and 243-187 in the House) to increase America’s production of chips (semiconductors) instead of relying on other countries.  Major supply chain issues with computer chips hampered manufacturing and drove up prices.  There was also bipartisan support for the $1.2 trillion Infrastructure Act (HR 3684) of 2021 (the bill passed the Senate 69-30, and the House 228-205).  65% of Americans, including 60% of Independents expressed support for this legislation.  The Infrastructure Act will create or save an estimated 15 million jobs over 10 years and would increase the share of infrastructure jobs from 11% to 14% of all jobs in this country.

Unfortunately, bipartisan cooperation is very rare.  In the face of fierce Republican opposition, Democrats have very recently moved ahead with the Inflation Reduction Act (HR 5376), to advance several initiatives strongly supported by Americans.  The bill would allow the federal government to negotiate prescription drug prices for Medicare recipients (an October 2021 tracking poll by KFF found 83% of Americans support this role for the federal government, including 95% of Democrats, 82% of independents, and 71% of Republicans).  It would provide the largest ever investment to combat climate change, in part by providing incentives to increase the use of hybrid and electric vehicles (2/3rds of Americans back incentives for hybrid and electric vehicles—Pew Research Center May 2022).  It would also reduce the Budget deficit by some $300 billion, to be paid for through new taxes — including a 15% minimum tax on large corporations and a 1% tax on stock buybacks (45% of Americans said reducing the budget deficit should be a top priority for the President and Congress in 2022—Pew Research Center, February 15, 2022).  

Republicans and the conservative media are attacking HR 5376 as reckless spending and tax increases that will further ruin the economy and result in even higher inflation.  The bill passed the Senate without a single Republican vote; and is slated to be voted on by the House this coming Friday.  In analyzing the bill, the nonpartisan Congressional Budget Office has said that it would indeed reduce the Budget deficit, and the effect on inflation would be negligible in 2022 and 2023.

While I have been critical of Republican leaders and the conservative media in recent posts, I recognize that Democrat leaders and the liberal media are guilty of the same or similar practices.  They want to win elections and retain control of the White House and Congress.  They downplay and disparage Republican initiatives, as they repeat narratives intended to fire up the base by stoking anger and division.  

The trouble with all this is that it leaves you and me, and most Americans in a very bad place.  We trust our government less and less.  We don’t have faith in our elected officials.  We don’t see government as caring about us or solving important problems.  And, we are angry and alienated when it comes to our views of the other side.  

In the big picture, our country is successfully emerging from a worldwide pandemic that killed millions and caused major dislocations in our economies and personal lives.  We’re mostly safe and mostly back to normal when it comes to Covid.  We have recovered all the jobs we lost, and our economy is strong on many fronts.  Gas prices are coming down.  Like other countries in the world, we’re battling high inflation, and the Fed is taking action to bring it under control.  It’s going to take some time, and many Americans are going to struggle as interest rate hikes eventually bring down inflation. 

In the meantime, we’ve taken steps, albeit modest, to address many other problems Americans view as important.  We’re working on rebuilding our infrastructure.  We’re working to combat climate change (including floods, heat waves, wildfires, hurricanes tornados, and droughts).  We’re working to lessen our use of fossil fuels as we increase the use of electric vehicles, and increase the use of clean energy such as solar, wind and hydroelectric.  We’ve passed the first federal gun control measure in decades.  We’ve kept our federal taxes low, and we’re taking the first steps in a long, long time to pay down the Budget deficit.  

Yes, we have many remaining problems.  Yes, we have some strong differences in opinion.  But I suggest we can solve these problems by working together.  Let’s tell our respective Democrat and Republican leaders and the respective conservative and liberal media to stop trying to divide us and make us angry at one another.  Let’s tell them to stop using false narratives and attacks designed to win elections rather than solve problems.  Let’s move forward, based on the common interests we share, and solve these remaining problems.