“The economy, stupid.” James Carville’s phrase always comes back. Bill Clinton’s strategist used it as the axis of the 1992 presidential campaign to defeat George Bush Sr. Now, with inflation soaring, interest rates on the rise and stock markets down, the Republicans are attacking on that flank before the mid-term elections next November. The president, Joseph Biden, has decided to fight in this area and this Tuesday he staged it with the announcement of a plan to contain inflation, for which he mainly blames Putin and the war in Ukraine.
Price stability is a task entrusted by Congress to the Federal Reserve. The US central bank has started to tighten its monetary policy and last week approved the biggest interest rate hike in 22 years, to be followed by several more in the coming months. The content of Biden’s new plan overlaps with that of Jerome Powell, chairman of the Fed, but is more politically charged than economically.
Biden presents this Tuesday the general lines of his plan; and on Wednesday he will stage it with a visit to a family at a farm in Kankakee, in the State of Illinois, which will probably provide the occasion for some costumbrista photo. Unemployment in the United States is close to its historical lows, the public deficit has been reduced and, however, the rise in prices clouds everything.
Before the November legislative elections, the Democrats believe that the leak last week of the draft of the Supreme Court ruling on abortion can help mobilize their voters, but they are aware that the economy will continue to decide the vote of many voters. “The United States is in a stronger economic position than any other advanced economy in the world. At the same time, inflation is too high and is putting pressure on working families. The president’s economic priority is to tackle inflation and reduce costs for American families, ”they indicate at the White House.
More oil and more clean energies
The first recipe of Biden’s plan is to hold Russian President Vladimir Putin accountable. The White House has already dubbed inflation “Putin’s Price Hike,” with capital letters. That may not be very effective in containing prices, but it deflects blame. The measures on the economic front announced by Biden basically involve releasing one million barrels of oil reserves per day, and asking Congress to impose taxes on inactive wells to try to increase supply.
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The energy proposals are completed with moving towards the electrification of the automobile fleet (with an eye on 2030!) and asking Congress to approve tax credits for clean energy and vehicles, and investments that reduce the “dependence on reckless autocrats like Putin ”. Those tax credits, if approved, would have specific content and, according to the White House, would allow families to save about 500 dollars a year on their utility bills, although it is not detailed how.
The next great recipe is to attack the Republicans. He accuses them of having a plan that would raise taxes on 75 million middle-class families by an average of $1,500 this year and punish nearly half of small business owners, including 82% of those earning less than $50,000 a year, a calculation that Republicans do not recognize as real.
Instead, Biden proposes measures to cut medical and pharmaceutical spending for families (reforming aspects of affordable insurance programs that are not working), increase agricultural production and competitiveness (to counteract the effect of the invasion of Ukraine), investment in infrastructure (which can eliminate bottlenecks in the long term, but will not contain prices in the short term). He also plans to ask Congress to adopt measures on housing and child care.
taxes on the rich
Biden’s plan ends by attacking former President Donald Trump for his tax cuts for the wealthy. He accuses him of having raised the deficit every year. Instead, Biden promises to reduce the deficit and to do this, apart from the economic recovery, he wants to put more taxes on billionaires and large companies. He argues that cutting the deficit will also contain inflation.
Most of the measures that have some economic content depend on Congress. And it is precisely control of Congress that Biden risks losing in the November 8 elections, in which a third of the Senate and the entire House of Representatives are renewed, in addition to numerous local and state positions.
“We have to start talking more than these guys talk [por los republicanos] and for that, friends, we have to control the House and the Senate and we can do it, ”Biden said on Monday in a political act. “If we win, we have the opportunity to do great things for this country,” he added.
Biden’s plan does not have many effective measures to contain prices, but it comes at the right time. Experts believe that inflation may have already reached its maximum for this cycle. The normalization of some prices, the base effect and the determined action of the Federal Reserve will allow it to fall before the November elections. The question is whether it will fall enough so that the economy is not too heavy a drag.
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