US gross domestic product fell 1.4% in the first quarter as inflation continued to soar. For older Americans, this jumpsuit evokes memories of the 1970s stagflation, a nightmarish combination of double-digit inflation, double-digit interest rates, soaring gas prices and persistently high unemployment. The whole economic mess ended up in President Jimmy Carter’s lap after the 1976 election, though it wasn’t his fault or that of his predecessors, Gerald Ford and Richard Nixon.
Sometimes global economic forces converge just like weather systems to create a perfect storm, and woe to the president who gets caught in it. The timing of the current storm couldn’t be worse for President Biden as he tries to play down the damage Democrats are preparing for in this year’s midterm elections. Republicans can be expected to rub Biden’s nose in bad economic data, but voters would be wise to study the facts rather than rely on political spin.
Biden inherited an economy still in pandemic shutdown mode. Manufacturers overseas, like here, had sent workers home and cut production to stop the spread of the coronavirus. Consumer spending plummeted. Manufacturers sold their inventory to meet whatever demand there was. Fuel prices had fallen because motorists were also staying home.
Suddenly, vaccines allowed Americans to get back to work, highways and shopping just as Biden was settling into the White House. A surge in demand for everything has crashed into a bottleneck in the production and transportation of goods. Americans have gone back to their cars just as domestic and foreign oil producers have chosen to restrict production. Prices at the pump have skyrocketed.
The drop in gross domestic product – in stark contrast to the 6.9% increase in the first quarter of 2021 – reflects a drop in car sales as automakers still cannot get the raw materials and chips they need. . Manufacturers, having reduced their stocks, are now struggling to meet consumer demand. Their sales therefore drop.
Presidents Richard Nixon, Gerald Ford and Carter have grappled for years with the combination of a global economic contraction, two punitive oil embargoes in the Middle East, tens of thousands of troops returning from Vietnam and too few jobs to employ them. Biden, much like Carter and Nixon, has also faced significant public comebacks from military debacles abroad: Nixon’s disorderly pullout in Vietnam, Carter’s failed attempt to rescue American hostages in Iran, and Biden’s attempt botched withdrawal from Afghanistan.
There’s no easy way for presidents to spread bad economic news other than to make it clear that there’s a silver lining — like Biden’s reminder on Thursday that unemployment rates haven’t been low since 1970 – and to remind the public that presidents at liberty – market economies have minimal powers to halt inflation or force economic growth. But a one-term presidency and midterm pain await any leader who tries to ignore these factors or ignore the tensions facing American consumers (and voters).
Our view: Sovereignty is insufficient, but state-tribal relations are improving