Business Maverick

Business Maverick

Biden Pegs U.S. Economic Contraction on ‘Technical Factors’

epa09657999 US President Joe Biden arrives to participate in the White House COVID-19 Response Team's virtual meeting with the National Governors Association to discuss the Covid-19 situation in the United States, in the Eisenhower Executive Office Building on the White House complex in Washington, DC, USA, 27 December 2021. EPA-EFE/MICHAEL REYNOLDS

President Joe Biden blamed the first contraction of the U.S. economy since 2020 on “technical factors,” saying that employment, consumer spending and investment all remain strong.

“The American economy — powered by working families — continues to be resilient in the face of historic challenges,” Biden said in a statement. “While last quarter’s growth estimate was affected by technical factors, the United States confronts the challenges of COVID-19 around the world, Putin’s unprovoked invasion of Ukraine, and global inflation from a position of strength.”

Gross domestic product fell at a 1.4% annualized rate in the first quarter after a 6.9% pace of growth at the end of 2021, the Commerce Department’s preliminary estimate showed Thursday. A widening trade deficit caused most of the weakness, though consumer spending also lagged forecasts.

The contraction came as a surprise, as economic forecasts projected growth of roughly 1%, presenting a fresh challenge for Biden and Democrats heading into the November midterm elections.

Biden’s approval ratings have plummeted amid high inflation, the lingering coronavirus pandemic, crises in Ukraine and Afghanistan, and a domestic agenda that has stalled amid infighting within the president’s own party. The new GDP data blunts Biden’s argument that his policies have generated historic economic growth.

Republicans seized on the report, charging that it shows Biden is leading the country into an economic recession.

“Accelerating inflation, a worker crisis and the growing risk of a significant recession are the signature economic failures of the Biden Administration — and will likely get worse,” Representative Kevin Brady of Texas, the senior Republican on the House Ways and Means Committee, said in a statement.

Biden said Republicans are seeking to fight inflation and other economic ills by raising taxes on “middle class families,” citing a plan put forth by Senator Rick Scott of Florida, who leads Senate Republicans’ campaign committee for the November midterm elections.

“We need to keep making progress — cutting costs for working families, making more in America and creating good-paying jobs you can raise a middle-class family on,” Biden said.

Scott’s “Plan to Rescue America” would impose income taxes on all Americans — about half do not earn enough to pay federal income tax now — and sunset all federal legislation after five years, including laws authorizing Social Security and Medicare, unless Congress renews them.

Scott’s outline has divided Republican leaders, who would prefer to focus on attacking Biden and Democrats for their economic policies during the election season.

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