ECONOMY
The economy, and inflation, are revving up at a terrible time for Biden

President Biden has spent his presidency touting the country’s economic growth. But the economy’s unfettered strength is becoming more of a political liability for the White House.

By Abha Bhattarai and Tyler Pager
Updated April 13, 2024 at 9:59 a.m. EDT | Published April 13, 2024 at 6:00 a.m. EDT

The booming economy is exacerbating a key vulnerability for President Biden heading into the height of campaign season, as inflation and interest rates could remain higher until deep into the final weeks of the presidential election. ... Fresh data this week shows inflation picked up again in March, in the latest sign that the economy is overheating. Unexpectedly strong job growth, wages and consumer spending are a plus for most Americans but bad for inflation. The higher inflation reading makes it more likely that the Federal Reserve will keep interest rates — and mortgage rates — elevated until late in the year, possibly until days after the election, eluding much political gain for Biden.

“It’s really a case of bad luck,” said Karen Dynan, a professor at Harvard University and former Treasury Department chief economist. “The Biden administration has made some big strides but it’s up against one of the most disruptive economies in decades. Rate cuts would be a welcome development for a lot of people, but the prospects for cuts have really changed given what’s happening with inflation.”

Gasoline prices, in particular, have always played an outsize role in how Americans feel about the economy. The average gallon of gas has been creeping up in the past two months to $3.63 a gallon on Friday, according to AAA. Fears of rising prices could already be weighing on Americans anew, as consumer sentiment fell unexpectedly in April, according to a University of Michigan survey released Friday.

A booming economy can fuel inflation if spending is so robust that consumers are willing to pay ever-higher prices for goods and services. Consumer spending makes up two-thirds of the U.S. economy, and so far Americans have been more than happy to splurge on services like dining out, travel and hotel stays, despite inflation. That’s forced businesses to ramp up hiring — and raise wages — which in turn pushes prices even higher.

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By Abha Bhattarai
Abha Bhattarai is the economics correspondent for The Washington Post. She previously covered retail for the publication. Twitter https://twitter.com/abhabhattarai

By Tyler Pager
Tyler Pager is a White House reporter at The Washington Post. He joined the paper in 2021 after covering the White House at Politico and the 2020 presidential campaign at Bloomberg News. He won the Gerald R. Ford Journalism Prize for Distinguished Reporting on the Presidency in 2022. Twitter https://twitter.com/tylerpager