Higher Gasoline Prices — the Last Thing the Biden Campaign Needs
Author: Greg Valliere
September 7, 2023
WITH THE LABOR MARKET still at full employment and GDP for this quarter looking good (the Atlanta Fed is predicting 5.6% economic growth this quarter), you would think that Biden has something to boast about. But poll after poll in recent weeks show dismal voter ratings of Biden’s handling of the economy in general and inflation in particular. And the inflation story has suddenly gotten worse for him.
THE PUBLIC IS FOCUSED ON THREE MAJOR ASPECTS OF INFLATION: Food prices, still stubbornly high; rents, which have surged this year; and now — once again — the price of energy. With global producers cutting back on output, gasoline prices may continue to rise.
AFTER A SPENDING BINGE THIS SUMMER, consumers now face an assault on their real disposable income. In addition to the three inflation sources listed above, student loan payments are about to resume, car prices could jump if the United Auto Workers go out on strike; the impact of aggressive Fed tightening will begin to affect interest rate-sensitive sectors; and a looming government shutdown could put a dent in consumer confidence.
WHITE HOUSE ADVISERS EXPRESS PUZZLEMENT over the public’s sour views on Bidenomics, but it’s no mystery: consumers see higher prices everywhere. The summer drop of inflation may give way to an autumn of higher gasoline prices. Biden’s polling numbers are terrible — In a new Wall Street Journal poll this week, 59 percent disapprove of Biden’s handling of the economy, and 63 percent disapprove of how the president has handled inflation.
THE SURGING BUDGET DEFICIT, PROJECTED TO HIT $2 TRILLION this year, also could become a big political negative for Biden. Economists are divided on whether huge deficits cause inflation, but voters overwhelmingly cite the red ink as a factor in keeping inflation high.
THE FEDERAL RESERVE FACES QUITE A BIND: The central bankers have been signaling that its rate hikes may be over, but they can’t possibly consider rate cuts until well into 2024. Like most presidents, Biden wants the Fed to help in his re-election campaign, but the Fed would be accused of partisanship if it started cutting rates aggressively next year after insisting that it wouldn’t rest until inflation got below 2% and stayed there.
BOTTOM LINE: If consumers refuse to acknowledge that the economy is in solid shape — and they focus instead on inflation — Biden will be in big trouble. The public overwhelmingly thinks he’s too old for a second term, and if he can’t get better scores on the economy, he could be no better than a 50-50 bet for re-election. Higher energy prices are the last thing he needs.
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