Biden rejects recession label, declares nation is 'on the right path' despite shrinking economy
WASHINGTON – President Joe Biden tried to reassure the American people Thursday that the economy was getting back on track as Republicans pounced on new data showing the nation’s economy shrank for second consecutive quarter, a common definition of a recession.
Biden touted a new deal with Sen. Joe Manchin, D-W.Va., that could revive his sweeping plans to fight climate change and cut health care costs while reducing the deficit.
“This bill will reduce inflationary pressure on the economy," he said in remarks at the White House.
Biden praised House and Senate passage of a different – and bipartisan – bill to boost computer chip manufacturing, a move that could encourage manufacturers to expand their operations in the U.S. and protect against future chip shortages that have contributed to higher prices on cars and other goods.
He also met with CEOs from the financial, technology and travel industries to emphasize areas where the economy is strong, asserting in an earlier statement that the nation is "on the right path."
Prep for the polls: See who is running for president and compare where they stand on key issues in our Voter Guide
Brian Moynihan, CEO of Bank of America, told Biden his customers still have money in their accounts "to help them through as the economy resets and settles in.”
After ticking off statistics on job creation and business investment during his first public remarks of the day, Biden declared: “That doesn’t sound like a recession to me.”
Republicans disagree and immediately began pummeling Biden after the Commerce Department reported a drop in the nation’s gross domestic product from April to June.
“Democrats inherited an economy that was primed for an historic comeback and promptly ran it straight into the ground,” said Senate Minority Leader Mitch McConnell, R-Ky.
The Club for Growth, a conservative group based in Washington, D.C., that promotes small government and low taxes, quickly launched an ad criticizing “the Biden recession” that will run in three states with competitive Senate races: Arizona, Nevada and North Carolina.
New GDP numbers:Economy shrank 0.9%, marking second straight contraction and raising recession worries
New rate hike:Fed increases key interest rate by 0.75 points again.
Whether the National Bureau of Economic Research will declare the nation is in a recession remains to be seen.
Biden administration officials spent the days leading up to announcement arguing that most of the economic data continues to be strong, particularly the low unemployment rate.
On Thursday, Treasury Secretary Janet Yellen said the recent GDP contractions show the economy is “transitioning to more steady, sustainable growth" after a rapid recovery from the pandemic.
That argument was backed up Wednesday by Jerome Powell, chairman of the independent Federal Reserve. After the Fed raised interest rates by a hefty amount for the second month in a row to curb inflation, Powell said there are still too many areas of the economy performing well for the U.S. to be in a recession.
The Fed has been moving aggressively to slow inflation without significantly increasing unemployment, something Powell acknowledged has “gotten more challenging over recent months.”
Being able to use the word “recession” gives Republicans more political firepower going into this fall’s midterm elections.
While economists can debate whether that label is correct, what matters most is voters’ perception about how things are going – and that’s not good. Half of 1,000 registered voters surveyed this month in a USA TODAY/Suffolk University Poll said a recession already has arrived.
Yellen said people may use the word "recession" when they mean inflation.
“Some may worry the labor market will weaken," she said, "but I think the biggest burden that’s weighing negatively on household sentiment is inflation, and that’s why that is our top priority.”
The Biden administration has been criticized for miscalculating the risk and staying power of inflation.
Biden hopes the deal Manchin announced Wednesday will lower some prescription drug prices and help millions of Americans pay their insurance premiums.
The plan, which Democrats must still prove they can pass with their narrow majorities in both the House and the Senate, would also devote hundreds of billions of dollars to clean energy and climate change programs. It would raise taxes on large corporations through a minimum tax and on wealthy individuals through beefed-up enforcement, according to Manchin, while reducing the deficit by about $300 billion over 10 years. Manchin had insisted on deficit reduction to help control spending and rein in inflation.
Growing deficits and rising interest rates are projected to drive federal debt held by the public to unprecedented levels over the next 30 years, according to the nonpartisan Congressional Budget Office.
“Driving down inflation was my No. 1 goal,” Manchin said. “And that's what we worked on."
Still, House Minority Leader Kevin McCarthy, R-Calif., said Thursday that the package amounted to “doubling down on the same failed policies” by pushing new spending and raising taxes.
“Was the worst inflation for years not enough?” McCarthy said.