Politico

White House braces for grim news on economy


The White House is scrambling behind the scenes and in public to get ahead of a potentially brutal economic punch to the face that could give Republicans the chance to declare that the “Biden recession” is under way.

Wall Street analysts, economists and even some in the Biden administration itself expect a report on Thursday to show the economy shrank for a second straight quarter, meeting a classic — though by no means the only — definition of a recession.

Senior administration officials are hitting the airwaves and arm-twisting reporters in private, imploring anyone who will listen that the economy — despised by majorities of both Republicans and Democrats fed up with inflation — is still healthy.

But White House officials admit that changing people’s minds is a daunting task as the highest inflation in four decades severely cuts into wages even as the economy continues to churn out jobs and Americans keep spending.


“I don’t think any of us are trying to convince anyone that their feelings about the economy are wrong,” Jared Bernstein, a member of the Council of Economic Advisers and one of Biden’s longest-serving aides, said in an interview. “What we are trying to do is explain things in a much more nuanced way than most people are getting from the daily news flow.”

Bernstein’s CEA and the Treasury Department are cranking out blog posts and studies arguing that the current post-pandemic moment — while strange and disconcerting to many Americans — is nowhere close to a recession.

Treasury Secretary Janet Yellen showed up on NBC’s “Meet the Press” on Sunday and declared, “This is not an economy that is in recession.” On Monday, senior Biden aide Gene Sperling ventured into hostile territory on Fox News. The next day, National Economic Council Director Brian Deese joined the White House briefing to make the case.

Aides are even quietly praising occasional White House nemesis Larry Summers, the voluble former Treasury secretary who on Monday said on CNN that anyone who says we are in a recession now is “either ignorant” or “looking to make political points.” Summers still believes a recession is likely in the relatively near term.

Biden on Friday afternoon received a briefing from Yellen, Deese, Sperling, CEA Chair Cecilia Rouse, Energy Secretary Jennifer Granholm, Budget Director Shalanda Young and Amos Hochstein, coordinator of international energy policy at the State Department.

The lengthy, remote session focused on just how much gas prices are dropping (a White House fixation), the impact of that decline on consumers and continuing geopolitical issues — mainly the war in Ukraine — that could still send oil and gas prices soaring again.

White House press staff are also regularly convening background briefings with economics reporters and senior administration officials to talk up the economy’s strengths, no matter what the GDP numbers say this week.

For their part, Republican leaders sense an opportunity to leverage their already big advantage on the economy as a midterm election issue and ride it to even larger gains in November than polls predict.

“It’s too bad the White House doesn’t have a vaccine for denial,” said Rep. Kevin Brady of Texas, the top Republican on the House Ways and Means Committee. “The question isn’t if we have a recession. The question is how harsh and how long it will be. It’s their denial of inflation and the worker shortage and other misalignments in the economy that is the reason why Americans are suffering so badly right now.”

Senior White House aides promise that Biden will be back on the midterm campaign trail soon after fully recovering from Covid to counter that narrative with a sharper message on the economy. He’ll say that it’s both still strong (with high job growth) and getting better (falling gas prices).

And Biden is planning to point to the bipartisan bill to boost domestic semiconductor production and a big push to salvage the prescription drug prices piece of his Build Back Back Better agenda as ways the administration is moving to lower the burden of inflation.

“You can see a line of sight to real progress on some of these core issues and you can expect him to be focused on that, lifting these things up to be sure people understand that this progress is important,” said a senior White House aide who was not authorized to speak on the record.

And Biden will get more sharply critical of GOP plans to make permanent the tax cuts that were passed under President Donald Trump and to weaken regulations.

Many economists agree that this post-pandemic moment doesn’t meet many criteria for recession, a politically charged word that has no precise definition and is generally only declared — often after the decline is over — by the National Bureau of Economic Research, a private research group.

The unemployment rate is near record lows even if the U.S. has two quarters of declining GDP. Job openings are too high and consumer spending remains fairly strong. And the first quarter’s negative numbers were heavily skewed by technical factors on inventories and trade.

“If we print a negative GDP growth rate this week, the administration should win the debate among economists as to whether we are already in a recession given that most tend to focus not just on two quarterly contractions but also look at the severity and breadth,” said Mohamed El-Erian, president of Queens College, Cambridge and chief economic adviser at financial conglomerate Allianz. “It may, however, lose the broader debate given the framing going into the data release.”

Indeed, the powerful forces the Democrats face — inflation running over 9 percent, an electorate convinced we are already in recession and Biden’s rock-bottom approval ratings on the economy — may prove insurmountable.

The White House is also contending with a Federal Reserve expected to boost interest rates by at least another three-quarters of a point on Wednesday. The Fed’s hiking campaign, aimed at slowing demand and reducing inflation, is already reducing consumers’ plans to buy big-ticket items like houses and cars, according to the latest Conference Board consumer sentiment figures.


And pollsters say the White House and Democratic candidates across the board have little chance of pulling off any big shift in public opinion, even if Thursday’s GDP number proves to be a pleasant surprise.

“Inflation is way bigger an issue, three times bigger, than anything else on anyone’s mind including Covid, Ukraine, guns, you name it,” said Tim Malloy, an analyst at the Quinnipiac University polling unit. “There is very limited time for them to fix this as the clock ticks down to the midterms. There really is little upside potential for them here.”

In an average of major national polls on the issue maintained by RealClearPolitics, Biden is at 32 percent approval on the economy compared with 64 percent who disapprove.

Despite the stiff headwinds, top White House aides say they have no choice but to try to make the case that the economy is better than polling would suggest.

“Every person is the world’s top expert on how they are doing,” said a second administration official. “The reason it’s important to go out and explain the economy accurately is you don’t want people getting excessively pessimistic about factors in the future and only relying on those in the media with the biggest megaphones.”

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