by Greg Valliere, AGF Management Ltd.
Insights and Market Perspectives
IT’S BECOMING CLEAR that the massive 2021 spending binge has become an albatross for Joe Biden and the Democrats. Voters believe last year’s fiscal blowout ignited inflation, yet the president still brags about it and wants to spend more.
THE $5 TRILLION-PLUS in new spending during Biden’s first year clearly was rocket fuel for the economy and the stock market, but it has backfired politically.
THERE WAS MORE EVIDENCE OF THIS LAST NIGHT in West Virginia, where a Donald Trump-endorsed candidate won a GOP House primary — in part by blaming his opponent for supporting infrastructure spending that, ironically, will be a huge plus for West Virginia’s economy.
BIDEN CONTINUES to call for more spending on clean energy, more health benefits, student loan relief, etc. He claims that more spending is a prescription for lower inflation, but the public isn’t buying that twisted logic — and the public also believes that the administration’s hostility to fossil fuels has driven up energy prices.
BIDEN IS ON SOLID FOOTING when he points to the red-hot labor market, but he doesn’t even get much credit for that. A majority of voters believe the economy is in poor or mediocre shape.
80% OF RESPONDENTS IN A RECENT CNN POLL AGREED THAT Biden’s policies “have hurt the economy,” and they overwhelmingly agree that the government “isn’t doing enough to combat inflation.”
WITH THE ISSUE OF INFLATION SO TOXIC FOR DEMOCRATS, they’re scrambling for new issues, but even concerns about restricting abortion rights may be eclipsed by $5 per gallon gasoline prices. Biden will portray the Republican agenda as extreme, and the Senate has scheduled a vote today to guarantee abortion rights (it won’t pass).
SOME ECONOMISTS BELIEVE INFLATION MAY BE CLOSE TO PEAKING, but cooling data this summer may not come quickly enough for the Democrats, who still appear likely to lose the House — and perhaps the Senate as well — this November. The election almost certainly will result in a slowing of spending, which the public believes is the major factor driving inflation higher.
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This post was first published at the AGF Perspectives Blog.
