WASHINGTON (AP) — President Joe Biden argued Tuesday that his economic plan is working despite economists’ predictions of a recession, a looming battle over paying the country’s debt, and a nation that feels on shaky economic footing.
Biden’s State of the Union address focused on the economy, with a message aimed primarily at lower- and middle-income Americans, as he argued for increasing manufacturing jobs and purchasing more American-made goods. He proposed raising taxes on corporations and the wealthiest Americans to help fund programmes to reduce the cost of health care and child care.
“Too many people have been left behind and treated as if they are invisible for decades. Perhaps you’re watching from home “Biden stated. “Remember the jobs that disappeared? You recall them, don’t you? That is something that the people back home recall. You wondered if there was still a way for your children to get ahead without having to move away. That makes sense. That is why we are constructing an economy in which no one is left behind. Jobs are returning. Pride is making a comeback.”
Biden was attempting to persuade a sceptical audience of his administration’s handling of the economy. Consumer sentiment remains low by historical standards after being battered by decades-high inflation for more than a year, with two-thirds of consumers expecting an economic downturn this year, according to the University of Michigan’s latest consumer sentiment survey.
In a separate Gallup poll released Monday, more than two-thirds of respondents expect inflation to rise, nearly half expect the market to fall in the first half of 2023, and three out of four expect interest rates to rise further. Voters blame Biden for their economic gloom, with 61% disapproving of his handling of the economy in an NBC News poll last month.
“In one sense, you have a fairly strong and steady labour market. We certainly see strong consumer spending, which is another measure of sentiment, but clearly high prices have been a gale-force wind that a lot of consumers have had to contend with for over a year,” said Joe Davis, global chief economist for investment firm Vanguard.
Biden outlined the steps his administration has taken to encourage investment in semiconductor manufacturing and clean energy technology, as well as to rebuild the country’s infrastructure.
“Let’s see what happens,” Biden said. “We’re not done by any means, but the unemployment rate is at 3.4%, a 50-year low and near-record low for Black and Hispanic workers. We’ve already created 800,000 well-paying manufacturing jobs with your help, the fastest growth in 40 years.”
Biden urged Congress to do more to reduce costs for Americans, such as capping insulin prices, restoring the child tax credit, and improving access to affordable housing.
To fund those efforts, Biden proposed closing tax loopholes and raising taxes on the wealthiest Americans and corporations, including quadrupling the tax on corporate stock buybacks, which companies use to boost their stock prices.
“I’m a capitalist, but you have to pay your fair share,” Biden said. “I believe that many of you here at home agree with me and many others that the tax system is unjust. It’s not right.”
Biden acknowledged the price pressures that Americans have faced, but emphasised the progress that has been made in lowering inflation.
“Right now, we’re better positioned than any other country on the planet,” Biden said. “But here at home inflation is coming down, here at home gas prices are down $1.50 from their peak, food inflation is coming down — not fast enough, but coming down. For the last six months, inflation has been declining while take-home pay has increased.”
Outgoing White House economic adviser Brian Deese said ahead of the speech that while there is still work to be done, the progress made thus far should make Americans optimistic about the economy’s future.
“The president understands uniquely that we have a lot more work to do in terms of the economy,” Deese said at the White House press briefing on Monday. “And that, even though we’ve seen real progress and inflation coming down, particularly in the last six months,” he says, “we still have more work to do to bring prices down, lower costs, and create some breathing room for American families.”
Biden has little chance of getting any of his economic policy proposals passed in a divided Congress, as Republicans have tried to blame him for rising inflation and debt.
According to economists, a number of factors, including Russia’s invasion of Ukraine, supply chain disruptions caused by the coronavirus pandemic, low interest rates, and shifts in consumer spending, have contributed to inflation over the last two years. Several economic studies have also found that the Covid stimulus bill pushed by Biden in his first year in office contributed to inflation, though the amount is debatable.
Republicans have threatened to obstruct legislation to raise the debt ceiling, which is required for the federal government to continue paying its bills, unless Democrats agree to budget cuts to reduce the deficit.
Biden stated that his budget for the coming fiscal year would reduce the deficit by another $2 trillion, in part by raising taxes on corporations and individuals earning more than $400,000.
Republicans booed when Biden accused them of threatening to cut Medicare and Social Security to reduce government spending. Biden took advantage of the opportunity to remove the possibility of such cuts from the table in negotiations.
“As we all seem to agree, Social Security and Medicare are now off the books,” Biden said. “All right, we have consensus.”