If anything has a knack of making presidents in otherwise commanding positions into one-term presidents, it is recessions of the U.S. economy.
Just ask Jimmy Carter in 1980 as inflation peaked at 14.5 percent in April 1980 and unemployment topped off at 7.8 percent in July 1980.
Or George H.W. Bush in 1992 as inflation went as high as 6.4 percent in 1990 and unemployment reached 7.8 percent in June 1992.
Or Donald Trump in 2020 during the COVID lockdowns and production halts as unemployment briefly skyrocketed to 14.7 percent in April 2020 as more than 25 million jobs were lost as the American people were paid to stay home.
Like clockwork, when bad things happen on the incumbent president’s watch, voters often end up saying it’s time for a change. One exception appears to be Ronald Reagan, who had a crushing recession in 1982, wherein inflation peaked at 10.9 percent in September 1981 followed by peak unemployment reaching 10.8 percent by December 1982.
Given enough time between a recession and the reelection bid — Reagan had two full years of falling unemployment and inflation headed into the November 1984 election — it is possible for a president to right the ship of state. But that’s the exception. Usually, recessions are fatal. The reasons surrounding them often do not matter.
And, surely President Joe Biden is now facing a similar risk, where although unemployment is near record lows at 3.6 percent presently, numerous signals of an imminent recession are already out there: the 10-year, 2-year treasuries spread has been inverted for almost a year now, inflation peaked at 9.1 percent in June 2022 and now the Federal Reserve is projecting 4.6 percent unemployment in 2024 as inflation is dipping to 6 percent.
Ominously, the M2 money supply — which peaked at $22 trillion in April 2022 after more than $6 trillion was printed, borrowed, and spent into existence for COVID — has now decreased a bit to $21.1 trillion, and is down 1.9 percent over the past 12 months. One has to go back to the Great Depression and the banking crises of the late 1800s the last time that happened.
And now there is a string of bank failures to contend with, so a recession is almost certainly already baked into the cake. That is no matter what policies Biden, the Fed, and U.S. Treasury decide to pursue — with or without Congress.
That brings us to the $31.4 trillion national debt ceiling. Prior to these bank runs, the Biden administration had been hoping to engage in a game of chicken with House Speaker Kevin McCarthy (R–California), who has signaled he would like to freeze spending at 2022 levels of $6.27 trillion and simply ignore Biden’s massive new $6.37 trillion proposed budget.
The difference is a measly $100 billion, most of it, about $70 billion, on the discretionary side of the equation. But given the spending, borrowing, and printing binge that Congress and the Fed have been on since COVID, a spending freeze is likely a good idea. It could further help to tame inflation, thus bringing down interest rates so that when we come out of the recession it’s not off to the races again as happened in the 1970s.
Biden, on the other hand, wants to keep spending more, and then when unemployment does go up, spending even more on top of that even though unemployment benefits and thus federal spending will automatically rise during the recession without Congress taking any action. He also thinks raving about Social Security and Medicare spending, or wagging his finger about a national default, will get him what he wants.
But here, the president is wrong. No matter what happens to the U.S. economy on its current trend, Biden will get blame, likely making 2024 a tossup. If Biden wants to throw a national default on top of it because he could not do an easy to reach compromise on discretionary spending — that’s obviously on Biden, who appears willing to steer the ship of state into the abyss rather than cut a single penny from the budget.
Robert Romano is the VP of public policy at Americans for Limited Government (ALG). The organization says it is a “non-partisan, nationwide network committed to advancing free-market reforms, private property rights, and core American liberties.”