It is routine talk ahead of elections in any democratic country — the ruling party and leader saying how strong the economy is and the opposition hammering away about how bad things can be. In the context of the US what neither Democrats nor Republicans tell their voting base is that no matter who wins on November 8 in the mid-term elections to the House of Representatives and the Senate, the legislative going will be tough both for the Grand Old Party and the Biden White House.
In a worst case scenario for the Democrats, they are expected to lose both the House of Representatives and the Senate; and the GOP will be happy to wrest control of the House of Representatives.
Inflation worries
The American economy in the words of President Joe Biden is “as strong as hell” even as Republicans paint the economic scene as one of “Biden’s recession”. The White House talks of a strong showing in the jobs market, wage increase, low unemployment rate and in general a GDP rise of 2.6 per cent in the last quarter. President Biden has emphasised that his administration and policies have added some 10 million jobs since he took office in January 2021, or the most created since records were maintained.
The opposition wants their base to look at the spurt in jobs against the backdrop of the country coming out of two years of Covid and a wage increase taken away by inflation, especially rising food and gasoline costs.
Republicans have argued that “real” wages after adjusting for inflation have actually been falling with hourly earning in real terms actually decreasing by 3 per cent over the last year. And average gasoline prices have gone up from about $2.40 per gallon when President Biden took office to about $3.75 by the end of this October.
Less than a week to go for the elections there is no doubt that the economy is the number one issue on the minds of voters and inflation is uppermost in voters’ mind. The message for politicians is — fix the economy and bring down cost of living.
The general refrain that sluggish growth, high inflation and rising food prices is a worldwide phenomenon especially against the backdrop of the war in Ukraine has few takers from among the American voters.
The people are worried about their living conditions but politicians of both parties are unable to explain the intricate economic issues in simple, understandable terms.
Windfall tax
A week before the electoral showdown Biden has upped the ante and indicated what could be in store irrespective of the outcome — a windfall profits tax on oil companies who have enriched themselves from “war profiteering” is in the offing.
The President has said that he will be working with Congress to see if additional taxes can be imposed on oil companies if they did not invest some of their profit so that costs can be lowered for consumers.
“It is time for these companies to stop war profiteering, meet their responsibilities in this country and give the American people a break and still do very well”, Biden said recently.
According to media reports, major oil companies like ExxonMobil, Chevron, Shell, BP and ConocoPhilipps have in the last two quarters raked in more than $100 billion, more than twice of what they made in 2021.
“Oil companies’ record profits today are not because of doing something new or innovative. Their profits are a windfall of war, a windfall for the brutal conflict that’s ravaging Ukraine and hurting tens of millions of people around the globe”, said Biden. The Biden White House is livid that gas prices are once again on the uptick days before the electoral showdown.
With the Republicans already hell bent on lowering taxes for the wealthy, the notion of slapping oil companies — seen as major supporters of the GOP — with additional taxes is not an easy sell. It is perhaps even a non-starter should the GOP muscle its way to the top.
Both Democrats and Republicans know that there are no quick fixes to any of the economic problems that are not unique to the US.
And no amount of rhetoric is going to do the trick in the context of the gloomy predictions made by International Monetary Fund and the OECD for global economic growth for 2023 and 2024.
In the immediate perspective despite the so-called silver lining— low unemployment and the bump in third quarter GDP — economists see a strong possibility of the United States getting into a recession within a year — some believe that it already has. Some economists have argued that raising interest rates to curb inflation could actually hasten the process.
And a highly charged, partisan political environment and a legislative gridlock is not going to help the US get out of its mess.
The writer was a senior journalist in Washington for 14 years covering North America and United Nations. Views expressed are personal