After more than a year of waiting, hoping and assuring Americans that the economy could pull off a so-called “soft landing,” President Biden and Vice President Kamala Harris appear to be on the brink of seeing that happen.
Inflation has cooled. Economic growth remains strong, though job gains are slowing. Mortgage costs are falling and the Federal Reserve is poised to begin cutting interest rates on Wednesday.
And yet, it is unclear whether those developments will significantly alter voters’ predominantly negative perceptions of the economy ahead of the presidential election.
Recent weeks have brought a run of good data on consumer prices and interest rates for the administration. The price of gasoline has fallen below $3 a gallon in much of the South and Midwest and is nearing a three-year low nationally. Spiking grocery prices have slowed to a crawl. Mortgage rates are down more than a percentage point from their recent peak. The Census Bureau reported last week that the typical household income rose faster than prices last year for the first time since the pandemic. The overall inflation rate has returned to near historically normal levels, and the Fed is poised to begin cutting interest rates from a two-decade high.
The Biden administration, which has taken heat from Republicans and many economists for fueling inflation with its economic policies, has begun to celebrate those developments in bold terms. Officials are claiming vindication for their multi-trillion-dollar efforts to boost households and businesses in their recovery from the pandemic recession.
Mr. Biden’s Council of Economic Advisers published a blog post on Tuesday highlighting economic and job growth under Mr. Biden that has surpassed projections. Lael Brainard, who heads Mr. Biden’s National Economic Council, told the Council on Foreign Relations in New York on Monday that the American economy has now reached a “turning point.”
“A few years ago, many were convinced that the combination of a large decline in inflation with a sustained expansion that we are seeing today couldn’t happen,” she said.
Aides to the president have been pointing toward this inflection point for more than a year. They were confident that Fed cuts would help push down mortgage rates and send voters a powerful message that the worst of the inflation fight was over.
And yet, administration officials concede those gains have come months later than they had hoped and possibly too close to the election to dislodge long-hardened voter concerns over inflation under the Biden-Harris administration.
They also acknowledge that the rise in prices on Mr. Biden’s watch, including on necessities like food and housing, continues to burden families. The Council of Economic Advisers noted in a separate post last week that housing price increases continue to play an outsized role in overall inflation — a challenge unlikely to be solved quickly, and which is likely to necessitate new policy measures to encourage home building.
As a result, there is little consensus about how much the recent economic news might buoy some voters as they cast ballots in November’s presidential race. Former President Donald J. Trump has relentlessly attacked the Biden administration, including Ms. Harris, for soaring prices.
Economists disagree on the impact of the rate cut, now that it appears to finally be arriving.
Josh Bivens, the chief economist at the liberal Economic Policy Institute in Washington, said he would guess “it’s a very, very small slice of people who would recognize this kind of symbolic importance of the cut” for the economy and the administration’s stewardship of it.
It is possible, he added, that the Fed waited so long to cut rates that it has “denied the Harris campaign this advantage for a long enough time that its force now is almost totally eroded.”
R. Glenn Hubbard, a Columbia University economist who led the Council of Economic Advisers under President George W. Bush and has advised Republican presidential candidates, said a quarter-point cut might not cause a ripple in American politics.
But a larger rate cut, of half a percentage point, could signal reason to worry for consumers, he said.
In what could be a potential argument from Mr. Trump and other Republicans, Mr. Hubbard said that a decision to cut rates by half a percentage point “could be argued to represent a significantly weakening economy with potential political ramifications.”
Others say the cuts could have real benefits for Americans’ lives, and that they could set off a run of positive media coverage about the era of high inflation coming to an end, both of which could benefit Ms. Harris.
“For the millions of Americans who can’t pay cash for a house or a car, or who can’t always pay off their credit card bill in full, cuts will provide real relief,” said Lindsay Owens, executive director of the liberal Groundwork Collaborative in Washington. “I absolutely expect this to translate into a boost in consumer sentiment, and upticks in sentiment will benefit Harris.”
Consumer expectations for the economy improved in August, according to the University of Michigan, and have risen more than 10 percent from last year. But sentiment overall remains low by historical terms and is down from the start of Mr. Biden’s term.
Polls typically show Mr. Trump leading Ms. Harris on economic issues, though the gap has closed since she replaced Mr. Biden as the Democratic nominee. Neither the Harris nor Trump campaigns would comment this week on a potential Fed move and its implications for the economy. But a Republican National Committee spokeswoman, Anna Kelly, criticized Ms. Harris for her administration’s record on borrowing costs.
“Kamalanomics has led to the fastest increase in mortgage rates since 1981, and only President Trump can restore economic growth after four years of failure,” she said.
The post A Fed Rate Cut Would Cap a Winning Streak for Biden and Harris on Prices appeared first on New York Times.