Biden Wants to Convince You the Economy Is Doing Great

By Michael Rainey

Happy Tuesday! The White House is gearing up for reelection, more U.S. military aid is headed to Ukraine and a watchdog estimates that over $200 billion in pandemic-era assistance provided through the Small Business Administration may have been fraudulent.

Here’s what you need to know.

Biden to Focus on Economy as Campaign Heats Up

As his reelection campaign shifts into a higher gear, President Joe Biden aims to convince voters that the economy is doing just fine, thanks in large part to a suite of policies he has enacted – an approach the White House is referring to as “Bidenomics.”

In a speech in Chicago Wednesday, Biden will reportedly highlight the continued growth and historically low unemployment the U.S. has experienced under his administration while connecting the results to his efforts to control inflation, invest in infrastructure and boost manufacturing. The White House says it intends to contrast Biden’s approach with the more familiar “Reaganomics” of the 1980s.

“He rejected trickle-down economics, the theory that tax cuts at the top would tickle down – that all we needed was government to get out of the way,” Lael Brainard, director of the National Economic Council, said at a press conference Tuesday. “That failed approach led to a pullback of private investment from key industries, like semiconductors to solar. It led to a deterioration of the nation’s infrastructure. And it led to a loss of a path to the middle class for too many Americans and too many communities around the country.”

White House Press Secretary Karine Jean-Pierre told reporters Monday that you can expect to hear more about that in the coming months. “It’s a vision about growing the economy from the middle out and the bottom up — you hear us say that over and over again, because we believe that trickle-down economics does not work,” she said. “So we believe our job is to continue to speak to the American people to lay out what it is that the President is doing on behalf of American families. … And we have the data to prove it. We have the numbers to show that his economic policy has indeed worked.”

Risky strategy: One problem for the White House is that voters aren’t giving Biden much credit for the stronger-than-expected economy. His approval ratings are in the dumps and many Americans say they have little faith that economic growth will continue, even if their own financial situations look pretty good. And inflation remains elevated, even if it has fallen significantly, weighing on many consumers.

Another risk is that a recession may occur before the election next year. Bank of America CEO Brian Moynihan told CNN Tuesday that he expects the U.S. to fall into recession early in 2024, though the downturn could be mild and help bring inflation back to normal levels. Other forecasters expect to see a recession by the end of 2023.

Still, the forecasters have not had a good track record during the recovery from the Covid-19 pandemic, suggesting that the White House strategy may be more viable than it first appears. “The consensus view continues to stubbornly call for a recession starting in a few months, but the economic data are telling a far different story right now,” economist Stephen Stanley of Santander US Capital Markets wrote in a note Tuesday, per Bloomberg. “Resilience remains the watchword.”

That’s a message that should resonate with the White House as the president starts to make his argument for reelection in 2024.

Watchdog Finds More Than $200 Billion in Potential Fraud in Pandemic Relief Programs

The Small Business Administration rushed to deliver $1.2 trillion in emergency grants and loans during the first two years of the Covid-19 pandemic, and while that spending likely played a major role in cushioning the economy and limiting the damage from the rapid-onset recession, more than $200 billion of it may have been lost due to waste, fraud and abuse, according to a new report from the agency’s Office of the Inspector General.

Most of the fraud occurred in the two largest pandemic-era programs run by the SBA: the Paycheck Protection Program (PPP), which provided $792 billion in assistance to small businesses, and the Economic Injury Disaster Loans (EIDL), which provided $405 billion. The EIDL program, which provided low-interest loans, had the highest rate of potential fraud, with about a third of its loans by value flagged as problematic, for a total of $136 billion. The fraud rate for PPP was lower at 8%, or about $64 billion of the forgivable grants doled out to business owners.

The watchdog said the fraud was inseparable from the speed at which the funds were dispersed, as directed by Congress. “Prior to 2020, the agency demonstrated a strong track record of managing fraud risk in its core programs,” the report says. “But in 2020, Congress mandated quick implementation of the pandemic relief emergency programs … Many of the existing controls and design features in SBA’s longstanding disaster lending and loan guarantee programs that largely worked to reduce fraud risks were removed in 2020. A failure to verify applicant data against existing federal government databases, such as the U.S. Treasury Department’s Do Not Pay system, and a statutory bar against obtaining and validating applications against tax records were two of the key missteps that took place in 2020.”

Newer aid programs were launched with more safeguards in place, and the report says that fraud rates at the SBA have plummeted. The watchdog called on lawmakers to support the development of more comprehensive and effective systems for the distribution of aid in future emergencies.

Chart of the Day

The Council of Economic Advisers released an analysis Tuesday that compares the inflation rates in the G7 nations, using methods to standardize reports across borders. “U.S. harmonized inflation generally rose and peaked earlier in the pandemic than the rest of the G7, measured on a 12-month basis,” the CEA said in a blog post. “Though inflation remains elevated across all countries in this analysis, the U.S. now has the lowest 12-month harmonized inflation in the G7, both for overall and core inflation. That said, inflation going forward remains considerably uncertain across all G7 nations, including the U.S.”

Majority of Americans Support U.S. Military Aid for Ukraine: Poll

The Biden administration on Tuesday announced another $500 million in military aid for Ukraine, including more than 50 Bradley and Stryker armored vehicles.

The Defense Department said the aid package is the 41st drawdown from U.S. inventories since August 2021. Other weapons and supplies in the package include munitions for Patriot air defense systems, Stinger anti-aircraft missiles, 155 mm artillery rounds, night vision equipment and more than 22 million rounds of small arms ammunition and grenades.

Although there have been grumblings in Congress about the ongoing assistance, a new nationally representative poll suggests that a majority of Americans support providing military aid to Ukraine.

In response to the question, “Overall, do you support or oppose sending US military aid to Ukraine?” 59% of respondents in the poll sponsored by the Reagan Institute answered affirmatively, while 30% said they oppose providing aid. Support was strongest among Democrats, 75% of whom endorsed aid. Half of Republicans said they back providing aid, while independents were evenly split, with 39% saying they did and 39% saying they did not.

Among those opposing military aid, 57% agreed with the statement, “We have too many unmet needs here at home to be sending billions of dollars to Ukraine.”

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