Biden’s victory lap was marred by a slide in stocks on inflation fears

The drop came on the back of new data that showed inflation is still a corrosive force in August, despite big falls in gasoline prices. All of this likely means more aggressive action by the Federal Reserve to curb inflation next week, amid fears that the central bank’s tough medicine could throw the economy into recession and chill a robust labor market.

Behind the scenes, as Biden scored what once looked like an unexpected legislative victory, his team was working frantically to prevent a freight rail strike that could erupt on Friday. A shutdown would be catastrophic, as it could cost billions of dollars a day and further disrupt supply chains that have helped fuel the inflation that has hurt many Americans this year. Food shortages could occur, and the prices of basic goods will rise again.

Presidents often can’t control the course of the economy, but the issue of scheduling was inadequate on Tuesday with Biden striking a blow to Democratic hawks in a bill that pours hundreds of billions of dollars more into an already overheated economy.

Beyond the poor outlook, the new storm clouds underscored the tenuous nature of signs of slowing inflation ahead of elections that have helped boost political momentum for Democrats in the late summer as they try to hold on to narrow House and Senate majorities.

However, on a day when disappointing economic data appeared to allow Republicans to hammer home their attacks on Democrats over inflation, they were distracted from their abortion policies after South Carolina Senator Lindsey Graham introduced a bill to ban the procedure. 15 weeks Abortion has put Republicans on the defensive after Roe v. In the wake of the Supreme Court decision that overturned Wade, the lukewarm reception Graham’s proposal received from Minority Leader Mitch McConnell spoke to how electorally toxic it could be.

Sunny days for the economy remain elusive

Tuesday’s data underscores the fragile foundation of an economic recovery from a once-in-a-century pandemic, one that Biden has undeniable strong points to highlight, but one that faces real pain for too many Americans.

The president on Tuesday created a political message that suggested a national and personal political revival after a dark period, echoing the sentiments sung by warm-up act James Taylor: “I’ve seen the fire and I’ve seen the rain.” Despite the upbeat mood, the country seems a long way from the “sunny days I thought would never end,” as Taylor also recalled in the hit.

Still, Biden hailed this summer’s Inflation Relief Act and the infrastructure deal he signed last year as dramatic victories for serious lawmakers over special interests and examples of how good government can work for all US citizens.

“Today proves that America’s soul is alive, America’s future is bright, and America’s promise is real,” he said.

Senate Majority Leader Chuck Schumer, Democrat of New York, drove home the political point, declaring, “Not a single Republican joined us to make these new investments in new jobs possible, not one.”

The mood of optimism in the White House arose from what seemed to be a defeatist agenda for Biden for months. The president’s list of accomplishments on Capitol Hill is now being compared to recent administrations as the midterm elections, typically worrisome for first-term commanders in chief, approach.

Some polls show Democrats surging in the general congressional vote ahead of November, and hopes of a massive red wave have dimmed amid a shifting political landscape following the Supreme Court’s abortion decision. And yet the unpredictable nature of the economy, which is shedding jobs but remains a major challenge for many Americans, means it will still be difficult for Democrats to overcome the incumbent party’s historic probability of losing seats during the terms of a first-term president.

Inflation barely slows down

When the Anti-Inflation Act was passed last month, after a tussle between progressives and moderate Democratic Senator Joe Manchin of West Virginia, there was fierce debate over whether it would live up to its name.

The White House insists it will do exactly what it says it will, for example, because it will lead to lower costs of prescription drugs for the elderly. But most analysts say that such deflationary effects will occur in the long run. Most Americans certainly won’t have much of an impact before they go to the polls in November, or before early voting begins in many states in the coming weeks.

The White House signaled progress in Tuesday’s inflation report. It is true that although year-on-year prices rose by 8.3%, they fell from the 8.5% increase in July and the 9.1% increase in June.

“Overall, prices have been essentially flat across our country over the past two months — that’s a welcome sign for American families, but there’s still more work to be done,” Biden said in a statement. But that was a very selective reading of a report that showed the 40-year maximum burden of the cost of living. In fact, food prices rose 11.4% last year, the largest annual increase since May 1979, according to data from the Bureau of Labor Statistics. Egg prices rose by 39.8% compared to a year ago, flour is 23.3% more expensive. Milk has increased by 17% and bread by 16.2%. Rents, medical care and new cars are more expensive than they were a year ago.

Figures like these explain why inflation is such a damaging force; everyone feels it, and it hammers the poorest Americans disproportionately. Claims that things are getting better from Biden won’t ease the frustration voters will feel in the grocery aisles, even as gas prices have been dropping almost daily for weeks.

The disappointing inflation report helps explain why stocks sank on Tuesday amid growing investor concern that the Fed could overshoot its response — another 75 basis point hike in interest rates is expected next week — and push the economy into contraction. The Dow fell 3.9%, the S&P 500 fell 4.3% and the Nasdaq fell 5.2%. Stock prices often bounce back quickly, but dramatic one-day declines are worrisome for Americans with their pensions invested in the market. And they increase confidence in the economy that can be reflected in voting patterns on Election Day.

Renewed concerns about inflation are also fueling anxiety for consumers, possibly due to another politically significant shock. CNN reported this week that some White House officials are worried about rising energy prices for Americans this winter as Russian President Vladimir Putin cuts supplies of natural gas to Europe, part of a new Cold War-style showdown fueled by Western opposition. The invasion of Ukraine.

Train strike threat

As if current economic conditions weren’t challenging enough, the administration is scrambling to fend off a new threat: A strike across the nation’s freight rail network could happen as soon as Friday if no deal is reached.

Biden and White House officials are burning the phone lines to union leaders and industry leaders to avert industrial action that the Association of American Railroads predicts would cost more than $2 trillion a day and could lead to food and agricultural shortages, manufacturing shutdowns and jobs. losses A strike would be another blow to the supply chains that have stalled the pandemic and contributed to rising inflation. The freight rail network plays a critical, but often overlooked, role in American life. In a letter to members of Congress this week, the American Trucking Associations warned that a freight shutdown would require 460,000 more trucks — an impossible goal — to move freight over the road, especially given the current shortage of 80,000 drivers.

The railroad strike, and the economic damage it would cause, is closer
The dispute puts Biden in a difficult position, creating a conflict between his long-standing support for union workers and his immediate political imperative to avoid another devastating blow to the economy with the election less than two months away. The White House confirmed Tuesday that the president had spoken with railroad unions and freight companies while visiting Boston the day before. Union officials and railroad representatives will travel to Washington on Wednesday to meet with Labor Secretary Marty Walsh, CNN reported Tuesday afternoon.

More than 60,000 railroad freight workers could walk off the job Friday if they can’t get certain quality-of-life benefits and changes in a system that requires engineers and behaviors that require them to be constantly called to work.

Biden began a strike two months ago by imposing a 60-day cooling-off period during which a panel he appointed made recommendations for wage increases. But that deadline expires at 12:01 a.m. Friday, ending the president’s power to block strike action. Congress could step in, but Democrats and Republicans would have to find a rare consensus on what to do.

Politically, Biden cannot afford a major economic disruption. And Americans in general have already suffered so much in recent years.

But after a tumultuous period of one-step-forward-two-steps-back economic wrangling over commodities, the organizing principle of Biden’s presidency — getting the country back to normal — shows that a major challenge remains. And they show how quickly things can fall apart.