Joe Biden denies recession despite GDP decline in consecutive quarters

WASHINGTON — President Biden claimed Thursday that the US was not in a recession despite new data showing GDP had contracted for a second straight quarter — meeting the long-accepted definition of a recession.

“That doesn’t sound like a recession to me,” Biden said at the close of a White House event celebrating the revival of his massive Build Back Better plan, which Sen. Joe Manchin (D-WV) agreed Wednesday to support in a much-reduced form despite his prior concerns that new spending would worsen decades-high inflation.

The reworked legislation — rebranded the Inflation Reduction Act — features $433 billion in new spending, offset in theory by $739 billion in tax increases on wealthy people and businesses. It was introduced shortly after the Senate passed the CHIPS Act on Wednesday authorizing $280 billion in new spending on computer chip development. 

“Passing the CHIPS bill is gonna put another $72 billion for incentives and tax credits to expand semiconductor production,” Biden said. “And the Inflation Reduction Act will add another $370 billion in clean energy tax credits in reconciliation, including incentives to accelerate domestic production of solar panels, wind turbines, batteries and critical materials processing.” 

The president also claimed the bill would remedy America’s ongoing economic woes.

“With this legislation, we’re facing up to some of our biggest problems, taking a giant step forward as a nation,” he said.

But Republicans critics who say excess federal spending fueled the worst inflation since 1981 — hitting an annual rate of 9.1% in June — hammered Biden for proposing still more spending as a remedy.

“Democrats can change the name of their Build Back Broke agenda, but it won’t change the fact that it is a raw deal for hardworking Americans,” tweeted Sen. Marsha Blackburn (R-Tenn.).

Rep. Byron Donalds (R-Fla.) wrote, “With the U.S. officially in a recession, Senate DEMs are fighting AGAINST Americans by reviving Biden’s ‘Build Back Broke’ agenda.”

The new spending package stunned Washington after Senate Republicans joined Democrats to pass the computer chips bill under the incorrect assumption that Biden’s spending bill was dead due to Manchin’s concerns about inflation.

According to figures released by Manchin and Senate Majority Leader Chuck Schumer (D-NY), the new bill would fund $369 billion in environmental programs and $64 billion in continued Obamacare subsidies. A spreadsheet says the spending would be offset by $313 billion coming from a new 15% corporate minimum tax, $288 billion in savings by allowing Medicare to negotiate drug pricing, $124 billion in stricter IRS enforcement and $14 billion in a carried interest taxation change.

It’s unclear if the Congressional Budget Office ultimately will concur with the calculations or if the calculated revenue streams match the time periods of new costs.

Biden said in his remarks that the bill “gives folks rebates to buy new and efficient appliances to weatherize their homes, and tax credits for heat pumps and rooftop solar.”

“It also gives consumers a tax credit to buy any electric vehicle or fuel cell vehicle — new or used. And a tax credit for up to $7,500 if those vehicles were made in America,” Biden said.

The electric vehicle tax credit provision is a major win for White House counselor Steve Ricchetti’s lobbyist brother, Jeff Ricchetti, who was paid $280,000 since last year to lobby on behalf of such policies for General Motors, which produces electric vehicles.

In an initial written statement Thursday, Biden avoided using the term “recession” after the Bureau of Labor Statistics revealed US gross domestic product declined by 0.9% in the second quarter of 2022 after falling 1.6% in the first quarter, according to recently revised data.

“Coming off of last year’s historic economic growth – and regaining all the private sector jobs lost during the pandemic crisis – it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” the president said in a written statement.

“But even as we face historic global challenges, we are on the right path and we will come through this transition stronger and more secure.”

The US gross domestic product declined by 0.9% in the second quarter of 2022 after falling 1.6% in the first quarter, according to recently revised data. 

The GDP drop comes after what appeared to be a strong recovery last year with the lifting of most COVID-19 restrictions. US GDP grew by 6.9% in the final quarter of 2021 and by 2.3% in the third quarter.

The drooping GDP comes amid equally bitter economic news as inflation soared to a fresh 42-year record of 9.1% in June. 

Biden administration officials said last year that inflation would be temporary as the economy reopened from the pandemic. But inflation has steadily crept higher during Biden’s term in office, dashing those assurances, with Biden turning the blame on Russian President Vladimir Putin’s invasion of Ukraine, which increased global fuel and food prices. 

At a recent congressional hearing, Federal Reserve Chairman Jerome Powell said, however, that “inflation was high before — certainly before the war in Ukraine broke out.” 

US gas prices are down somewhat from an all-time high of more than $5 per gallon on average in mid-June, but the current average of $4.28 is still well above the price of $3.16 one year ago, according to AAA data.

The Federal Reserve is raising interest rates in a bid to tame inflation, though experts say that also could cause a recession. 

Biden administration officials sought to get ahead of the anticipated blow, arguing that the economy was simply in a period of transition, rather than recession.

White House economist Brian Deese insisted Tuesday that “two negative quarters of GDP growth is not the technical definition of recession.” But Republicans were quick to point to 2008 remarks by Deese, who said at the time that “economists have a technical definition of recession, which is two consecutive quarters of negative growth.”

“This is not an economy that’s in recession, but we’re in a period of transition in which growth is slowing,” Treasury Secretary Janet Yellen insisted Sunday. “And that’s necessary and appropriate, and we need to be growing at a steady and sustainable pace.”

Biden emphasized the positive aspects of the economy in his statement.

“Our job market remains historically strong, with unemployment at 3.6% and more than 1 million jobs created in the second quarter alone. Consumer spending is continuing to grow,” Biden said. “Earlier this week, I met with the Chairman of SK Group from Korea, just one of the companies investing more than $200 billion in American manufacturing since I took office, powering a historic recovery in American manufacturing.”

Biden added: “My economic plan is focused on bringing inflation down, without giving up all the economic gains we have made. Congress has an historic chance to do that by passing the CHIPS and Science Act and Inflation Reduction Act without delay.”

Republicans have accused Democrats of fueling inflation with government spending. A study released in late March by researchers at the Federal Reserve Bank of San Francisco said that in the final quarter of 2021, about 3 percentage points of US inflation — or roughly half of it at the time — may have been caused by government spending during the COVID-19 pandemic, including Biden’s $1.9 trillion American Rescue Plan Act.

“This is Joe Biden’s recession,” Republican National Committee Chairwoman Ronna Romney McDaniel said Thursday. “Biden can lie and deflect blame all he wants, but that will not alleviate the pain Americans feel every time they fill up their gas tanks, go grocery shopping, check their retirement savings, or balance their budgets. Biden and Democrats are responsible for our shrinking economy, and they’re only trying to make it worse.”