The incumbent parties typically lose seats in the House of Representatives and Senate in next year’s election, but a change in that attitude could be the difference between Democrats, who will suffer average losses this fall, or receive a fist, as in 1994. And administration officials are increasingly concerned about the economy because, according to several allies, this is a serious obstacle in the interim.

“The mood is shockingly bad in the White House and beyond,” said Stephen Ratner, an investment banker and former Obama administration official who spoke to Biden’s senior aides.

“If inflation somehow goes down and the mood of the electorate improves, they can compete,” Ratner said. “If that doesn’t happen, the by-elections could be terribly painful for Democrats very soon.”

Representatives of the White House deny a sense of panic over the economy or their chances in the medium term.

“So many economic indicators are not only extremely good, but also better than expected. And we are recovering much faster than previous recessions, “said Heather Bush, a member of Biden’s Board of Economic Advisers.

Bush has acknowledged that inflation – especially energy prices – is a problem for consumers. But she said that over time it will disappear, especially now that the Fed is raising rates.

“This recovery is not perfect,” she said. “But again, none of them have ever been like that.”

The Fed has no choice but to raise rates to try to lower prices. But economists who regularly talk to Biden and his advisers say the central bank often makes mistakes in betting by exceeding, pushing the brakes too hard and too fast and pushing the economy into recession.

“I don’t think there’s any readily available silver bullet that can change the way we look at the economy,” said former Treasury Secretary Larry Summers, who criticized some of Biden’s spending plans as inflationary.

Summers thanked Fed Chairman Jerome Powell for the central bank’s decision last week to raise rates and move to a tougher stance on inflation. The Fed has also sharply lowered its economic growth forecast for 2022 to 2.8 percent from 4.0 percent.

But Summers said she doesn’t think the Fed can achieve what it wants.

“They’re definitely predicting more hawkish mood than before, and that’s welcome,” he said. “On the other hand, I don’t think I really believe you can significantly reduce inflation by keeping unemployment at 3.5 percent for three years.” (The Fed last week predicted that the unemployment rate would be 3.5 percent this year and next and rise to 3.6 percent in 2024.)

This week, Powell expressed confidence that the central bank would be able to curb inflation without causing a recession, although he said it would not be easy.

In his speech, he said the Fed’s actions combined with external economic factors should help bring inflation back to the central bank’s 2 percent target over the next three years.

The story, he said, provides some “grounds for optimism” that the Fed could implement a mild economic slowdown that cools price jumps but does not lead to negative growth.

“Some argue that history has a lot of chances of achieving a soft landing,” the Fed chief said at the annual conference of the National Association of Business Economics. “Soft, or at least soft landings have been relatively common in U.S. monetary history. In three episodes – in 1965, 1984 and 1994 – the Fed significantly raised the rate of federal funds in response to the alleged overheating, without causing a recession.

The Fed expects to raise rates several more times this year – although Russia’s invasion of Ukraine has raised prices for important world goods such as oil and food, which could affect consumer spending and reduce the need for more aggressive Fed action.

At the moment, the big numbers in the headlines still look good for Biden. In February, the economy created 678,000 new jobs, continuing a sharp rebound from losses from Covid. The unemployment rate is only 3.8 percent. GDP growth is slowing, but it was sterling back in the last quarter of 2021.

But all these numbers in the headlines may have almost nothing political.

A senior Democrat economist speaking to Biden and his advisers said the White House was disappointed that the administration was receiving little credit for good economic news, despite the media’s relentless focus. on inflation. But the economist said the electorate treats Biden and the economy badly.

“I have one theory that some people went back to work after Covid, which they really didn’t want, and they would have preferred to be home with extra help,” the man said.

Wage increases are also most pronounced in the low-income group, which is a good outcome for those Americans who need help the most, but to a lesser extent in political asset, given that wealthier families tend to vote more.

The economist added that the White House is also confident that Biden will not receive much credit for his parts infrastructure bill that he passed.

“No one cares about it or even remembers,” the man said. “Just like Obama and the Affordable Care Act of 2010. And the Fed’s strategy is still just to get lucky. “

Democrats could point to an extremely steady performance on Wall Street as a sign of the confidence of corporate companies and investors in Biden’s leadership. But many Democrats don’t like to measure success by rising stock prices, which have even risen due to higher rates and the more hawkish Fed. Profits in the stock market disproportionately benefit Americans with higher incomes and can contribute to income inequality.

And there are market analysts who argue that stocks need to be counted, especially given that higher interest rates on the part of the Fed are starting to cut the housing market, a stable bright spot in the economy. Tariffs will still be low, but people will still have to pay more for housing.

“It’s ugly because of inflation, and in the next few months it’s going to get uglier, and the Fed could be put in a position where they need to be much more aggressive, and that could slow the economy a lot,” said Edward Moya, senior market analyst. . at OANDA, a foreign exchange trading firm. “Somehow Wall Street looked at it all and was able to accept it all and believe in all this enthusiasm for the economy.”

White House Deputy Director of Communications Kate Berner said Americans understand some of the reasons for rising prices and continue to support basic policies that help bring them down or worsen them. “They see US sanctions against Russia and their impact on prices, but they still support sanctions,” she said.

Biden’s polls on the economy are horrific almost everywhere. But Berner said polls on people’s personal finances are not so bad. Recent Langer Research Survey found that people’s sense of their own financial well-being was 61 out of 100. That’s almost 10 points less than the August low in the pandemic era, but it’s not as weak as some other figures.

And Berner said much of the public’s negativity to the economy stems from the widespread “Covid anxiety,” which will only weaken over time.

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