It's too early to write Biden's political obituary

For President Biden and the Democrats to lose, the Republicans have to win, and they are certainly not there yet.

Oct 19, 2021

THEY were probably smiling, well, just a little bit, at the White House late last week after reports emerged suggesting that the coronavirus was perhaps in retreat, with new infections down more than 40 per cent since August while hospitalisations and deaths were down.

After all, it was the advent of the highly contagious Delta variant, leading to a surge of the pandemic in the summer, that marked the end of President Joe Biden's political honeymoon and the beginning of his season of bad news and a continuing drop in his approval ratings.

First, the return of the pandemic was a major political blow to President Biden. After all, as a candidate he ran against the mismanaged response to the deadly virus by his predecessor and pledged at the start of this presidency to vaccinate Americans, expressing hope that his administration would beat the Covid-19 by July 4.

That didn't happen and if anything, President Biden's decision to enact coronavirus vaccine mandates as part of his effort to curb the pandemic has ignited a political backlash from top Republicans and their conservative allies.

Moreover, the earlier notion that America was entering a post-pandemic period and was back in business had to be reassessed. Concerns over the pandemic's surge have led businesses and consumers to slow down the return to normalcy and raised questions about the strength of the economic recovery.

Indeed, following months that saw an impressive increase in the number of new jobs, the spike in the Delta variant hit job growth in September, especially in the leisure and hospitality industries that had helped energise the job market earlier in the year.

If a lower-than-expected rise in unemployment didn't dampen the mood among President Biden's economic advisers, a higher-than-foreseen rise in consumer prices of 5.4 per cent in the same month did the trick, posing another major challenge for the administration.

The result is that inflation is now back at its highest in 13 years, forced upwards by rising wages, petrol, food and rent prices, the limited supply of housing as well as by the shortage of goods stemming from supply chain backlogs.

Adding to these monetary problems have been the fiscal battles that have been brewing in Washington in recent weeks, which in turn have exacerbated the political tensions between Republicans and Democrats as well as among Democrats themselves, which have all spelled huge political troubles for Biden.

There is some sort of good news for the president: America didn't default on its debt after the Democrats and the Republicans were able to reach a compromise over the issue of temporarily raising the country's debt limit.

The bad news is that the battle is not over but merely dragged out to December when the federal government could be facing a potential shutdown. The Republicans (led by Senate Minority Leader Mitch McConnell from Kentucky and incited by former president Donald Trump) are preparing to do their best to sabotage Biden's domestic agenda and turn him into a one-term president.

But the Republicans aren't the only ones threatening to derail President Biden's grand economic plans. Left-leaning progressive Democrats in the House of Representatives are holding up the president's US$1 trillion-plus infrastructure bill hostage until centrist Democrats in the Senate agree to approve the party's proposed US$3.5 trillion social-economic programmes.

So it's not surprising that pundits are contending that Biden's presidency is now in a political free-fall, that the Democrats are in disarray and perhaps are doomed and could lose their slim majorities in the House of Representatives and the Senate after the 2022 midterm election.

Gone are the comparisons of Biden to presidents Franklin D Roosevelt or Lyndon B Johnson, and the expectation that, like them, he would be able to restructure the nation's economic system. If anything, Biden has yet to defeat the pandemic and cannot even keep his own party together, not to mention that mismanaged withdrawal of US troops from Afghanistan.

Then there are some economists who are warning that inflation - the price surge that the White House's aides and the heads of the US Federal Reserve have been referring to as "transitory" - is here to stay, especially if the impaired supply chains cannot be repaired quickly.

And here is a prediction that could add to this sense of doom and gloom: A combination of slow growth and rising inflation, as unemployment and inflation move in the same direction, could revive memories of the stagflation during the 1970s that wrecked then Democratic president Jimmy Carter's chances of getting re-elected.

But much of these depressing forecasts about the economy and President Biden (who, by the way, has served less than one-fifth of his term in office) assume the worst-case scenarios: That political divisions between progressive and centrist Democrats are too deep to bridge and would make it impossible to get President Biden's economic plans approved. That the Republicans would not allow the US Treasury to pay its obligations and risk a global financial meltdown. And that inflation is unlikely to peak soon and that the Fed doesn't have the tools to control it.

There is no doubt that the pandemic has triggered economic aftershocks that would have affected the policy direction of any president. The supply chain problems that have contributed to producing massive shortages, long delivery times and rapid price increases, is but one example, which in turn raise concerns that the Delta disruptions would not be short-lived.

But this Delta-driven "blip" could disappear if the reports are correct about the Delta wave peaking. If that indeed would happen, the expectation is that the construction and manufacturing industries, and retail companies, would see a return to strong job growth in the coming months.

If the job market recovers slowly to pre-pandemic levels, the Fed's leaders would then be less reluctant to start scaling back their huge bond-buying programme. That in turn could help slow price increases without forcing the central banks to raise interest rates, a move that could push downward pressure on the economic recovery.

Beyond that, President Biden still remains in a position to energise the economy and revive his presidency in the next couple of months. That could happen if, as expected, the Democrats get their act together and reach a deal on the social-economic part of Biden's spending programmes.

Current conventional wisdom in Washington is that, after a few weeks of behind-the-scenes negotiations, the progressive Democrats would agree to cut down the original US$3.5 trillion spending proposals to under US$2 trillion, a number that would be acceptable to the centrist Democrats as well as to independent voters.

With clear indications that a deal is in the making, the road would then be open to the approval of the bipartisan infrastructure bill, perhaps by the end of this month, which would lead to the biggest investment in the US economy in decades.

Democrats hope that the passage of a more modest social-economic spending plan that includes assistance to poor and middle class families, paid for by higher taxes on corporations and wealthy Americans, would be welcomed by US voters and improve their chances of winning the 2022 midterm races, or at least suffering only minor losses.

Moreover, with all the focus on President Biden and the Democrats, one should not forget that the Republicans have yet to come up with winning economic plans and political candidates. They remain under the political spell of the unpopular former president Trump who continues to reject the results of the 2020 election. For President Biden and the Democrats to lose, the Republicans have to win, and they are certainly not there yet.