Obama-era economic adviser Stephen Rattner has warned that the United States could be on course for a recession just as the race for 2024 kicks off, a conundrum he blames on “poor economic policy.” of President Biden, Congress and the Federal Reserve.
“Mounting evidence suggests a hard landing — in other words, a recession,” the former adviser to the Treasury secretary wrote in a New York Times op-ed. “We need our economic policymakers to act quickly before the likely damage, already underway, escalates.”
Rattner said the Fed must move to raise interest rates “aggressively, quickly and much more aggressively than the markets and many economists expect.”
He added that to curb inflation, the United States needed to “reduce demand” by “forcing Americans to spend less.”
“It’s not desirable, but it’s the price we pay for the poor economic policies of the White House, Congress and the Federal Reserve,” he said.
“These bad policies include far too much fiscal stimulus as we navigate the challenges of Covid. The $1.9 trillion US bailout enacted at the start of the Biden administration will go down in history as an extraordinary political mistake.
Biden signed the $1.9 trillion US bailout package in March 2021, after passing Congress without a single Republican vote. Harvard professor Jason Furman has estimated that the combination of three separate stimulus checks and less spending has led to Americans having about $2.3 trillion more in the bank than before the Covid-19 pandemic. .
“And the Fed — an esteemed, independent steward of our monetary policy — also overestimated the amount of support the economy needed and pumped billions of dollars into the system.”
The consumer price index now stands at 8.5%, according to March figures released by the Labor Department on Wednesday, with prices up 1.2% from the previous month alone.
The Fed raised its benchmark interest rate by a quarter of a percent last month to between 0.25 and 0.5 percent. Officials forecast a series of 0.25% increases throughout the year that would take rates to 2% by the end of 2022 and 2.75% next year. The Fed also began to reduce its balance sheet by $9 trillion.
Rattner said the Fed must take action to raise interest rates “aggressively, quickly and much more aggressively than markets and many economists expect.”
Rampant inflation was exacerbated by Russian President Vladimir Putin’s invasion of Ukraine. The invasion led to sanctions that sent global energy prices skyrocketing. Food prices have also soared, with Russia and Ukraine supplying much of the world’s wheat and fertilizer.
While the Biden administration has said inflation will come down with fixes to supply chain bottlenecks, Rattner said such an idea was “fantastic.” He said Biden’s crackdown on corporate greed in industries like meatpacking and hearing aids, along with efforts to get more people into the workforce, will “unfortunately not do much.” -thing “.
Rattner said he didn’t believe a recession was “imminent,” but as a former Treasury secretary. Larry Summers noted that every time in the past 75 years that inflation was above 4% and unemployment was below 5%, the US economy went into recession within two years.
“A potential election nightmare for Democrats to think about,” Rattner said.
Obama advisers have apparently been unafraid to speak out against the Biden White House in recent months.
Last month, David Axelrod said Americans “don’t believe” the White House brand of high prices at the pump as “Putin’s price hike.”
‘[Biden] was saying, you know, everything is Putin’s price hike. Inflation is Putin’s fault. People don’t believe it either,’ Axelrod said on his podcast with GOP consultant Mike Murphy and former Obama press secretary Robert Gibbs, Hacks on Tap.
“They know we had inflation before that. They know gasoline prices were high before that, so they didn’t quite get it. You can’t blame everything on Putin in the economy,” he said.
“Why not just be upfront with people,” the Obama staffer added.
Just before the latest figures were released, the administration tried to preempt the dire inflation news by blaming Russian leader Vladimir Putin’s invasion of Ukraine.
White House press secretary Jen Psaki said during Monday’s briefing that the White House expected “headline inflation to be extraordinarily high due to Putin’s price hike.”
Inflation has emerged as a major political threat to Biden and congressional Democrats ahead of November’s crucial midterm elections. Small business owners now say in surveys that it is also their top economic concern.
Even before the war in Russia had further spurred price increases, robust consumer spending, steady wage increases, and chronic supply shortages had propelled U.S. consumer inflation to an all-time high. high level in four decades.
In addition, housing costs, which account for about a third of the consumer price index, have risen, a trend that doesn’t seem likely to reverse any time soon as homeowners attempt to recoup losses incurred during the pandemic.
Gas prices soared in March in response to the Russian invasion, contributing significantly to the inflation rate last month.
According to AAA, the average price of a gallon of gasoline on Tuesday – $4.10 – was up 43% from a year ago, although it has fallen from record highs in the past two weeks.