Biden’s economics pitch undercut by prospect of recession

President Joe Biden‘s economics messaging is being undermined by Treasury note and bond yields reaching benchmarks not seen since before the Great Recession.

But undeterred by the threat of recession before next year’s election, Biden is underscoring so-called Bidenomics in his official and campaign capacities.

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Although gross domestic product remains positive, federal government revisions reveal “troubling trends,” especially that economic growth is being created by public rather than private spending, according to Heritage Foundation federal budget fellow EJ Antoni.

“Government spending temporarily causes an increase in GDP, just simply because of mathematically how we calculate GDP,” he told the Washington Examiner. “That’s not something that is ever sustainable in the long run.”

While many economists predict there will be a recession by the end of the year or early next year, Biden can mitigate it by decreasing government spending, per Antoni. “Hopefully” the recession arrives “sooner rather than later,” the economist said, because “the longer you put this off,” “the worse the ultimate recession.”

“Whenever you have these economic booms that are based on cheap credit, easy money, low interest rates, as soon as those things get taken away, so does the economic growth,” he added. “It’s particularly concerning that interest rates are going up so high so fast and that it is not necessarily the Federal Reserve that is tightening credit and instituting these higher interest rates. The bond market is beginning to wake up to the realization that the Treasury’s current fiscal trajectory is 100% unsustainable, and, at some point, they are not going to be able to pay back what they promised they would.”

Aside from interest and Treasury bond rates, American Enterprise Institute senior fellow Desmond Lachman cited the “external environment” as a recessionary indicator, pointing to China and Germany‘s economies. Lachman also criticized the Federal Reserve for considering another interest rate hike before 2024.

“When rates go up, what that does is it causes all sorts of stress in the financial system that causes mortgage rates to go up, so it drives the economy into recession, and then the Fed will be forced to back off and ease policy like crazy,” the former Salomon Smith Barney managing director and International Monetary Fund policy deputy director said. “Something’s going to break.”

“The administration is in trouble because what they should do, if that occurs, is there would be a case for fiscal expansion, except what they’ve done is they’ve used up a lot of the fiscal space,” he went on. “So when we do go into recession, it’s going to be the Fed again that’s going to have to do all of the heavy lifting.”

Benchmark 10-year Treasury yields reached 4.785% this week, a tenth of a percentage point increase from the previous day. The 30-year Treasury yield additionally went up to 4.874%, both the highest since 2007.

The Republican National Committee this week scrutinized Bidenomics as the president announced he is canceling more than $9 billion in student loan debt for 125,000 borrowers through changes to income-driven repayment and public service loan forgiveness, as well as granting relief for those with disabilities.

“The Biden economy continues to worsen for everyday Americans,” RNC spokesman Jake Schneider told reporters. “Over the past week alone, average 30-year fixed mortgage rates reached the highest level in more than two decades, the average monthly payment for a new vehicle hit a new record high, and a new report called homeownership ‘unaffordable’ in 99% of the country. And, of course, prices have skyrocketed and real wages have plummeted since Biden took office.”

“Meanwhile, Americans trust Republicans to keep the country prosperous by the widest margin since 1991,” he said. “Bidenomics is a bust and everyone, except delusional Biden staffers, knows it.”

Schneider was referencing a Gallup poll that this week found its adult respondents trusted Republicans “to do a better job of handling the problem you think is most important,” with both findings underpinned by independent voters’s preference for GOP policies. That coincides with Biden’s average overall approval rating of net negative 14 points and economic approval of net negative 24 points on RealClearPolitics.

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Meanwhile, the Biden campaign amplified Bidenomics this week with a new national cable and battleground TV ad, “Never Left,” that will air during Dancing With the Stars, Bachelor in Paradise, and NFL programming as part of a $25 million 16-week push.

“Whether it’s taking on Big Pharma to cut prescription drug costs, lowering healthcare premiums for millions of Americans, or reducing energy bills for American families, fighting for the middle class isn’t an empty campaign promise for Joe Biden and Kamala Harris — it’s their political DNA,” Biden campaign manager Julie Chavez Rodriguez said. “This ad serves as an early reminder of the choice Americans will face next year: between MAGA Republicans whose agenda would give tax handouts to the ultra-rich at the expense of working people, or Joe Biden and Kamala Harris’s agenda for the middle class.”