After a successful midterm election, Joe Biden All set to start the second half of the first term of his presidential term.
Biden Travers Bumpy Road: Biden’s ride so far has been bumpy. Ascension to the top post was not as smooth as his predecessor’s Donald Trump objected to the decision of the election and vehemently called for its cancellation.
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What happened just before the inauguration on January 20, 2021, marked one of the darkest phases in American political history, as Trump’s fans got angry Capitol Hill and incited violence. Once the dust settled and the president got back to regular business, it was fairly comfortable for the first few months amid an economy that was slowly getting back on its feet. COVID-19 Devastated.
Biden’s first biggest challenge came in the form of a gallop consumer price inflation, Fiscal and monetary stimulus, which were given philanthropically to kickstart the economy battered by the COVID-19 pandemic, started exerting pricing pressure. After hitting a low of 0.3% in May 2020, the annual rate of inflation has reversed course and surpassed the Fed’s target of 2% in March 2021. Thereafter it was a steep climb till June 2022.
source: Bureau of Labor Statistics
The Fed had to act to rein in inflation, though critics blamed the central bank for a delayed policy response. Normalization of monetary policy was set to begin in March 2022, but before that financial markets began to grapple with the price of potential rate hikes and their impact on economic growth.
Russia-Ukraine War It couldn’t have come at a worse time. The war in Eastern Europe put further pressure on prices, adding to inflationary pressures.
Here’s a look at how Biden’s tenure compared to Trump and his predecessor Barack Obama On various fronts:
For comparison purposes, the first two years of Barrack’s second term (2013–14) and Trump’s first two years (2017–18) are considered. It is important to be cognizant of the fact that an apples-to-apples comparison is unlikely, given the different sets of economic and geopolitical variables each of them may face during their tenure. One could argue that the economic situation is to some extent a function of the policies of the administration.
Economic Development: Gross domestic product, a broad measure of macroeconomic performance, benefited from a strong rebound amid a 2.8% decline during the first year of Biden’s presidency. Pandemic in 2020. As the economy made a big comeback in 2021, growth accelerated sharply to 5.9% thanks to stimulus measures.
The reigns of his predecessors saw fairly trouble-free development, which was slightly below the long-term trend. It is to be remembered here that before Covid-19, the economy had settled in a range of around 2% after emerging from the Great Recession of 2007-2009.
source: Self-built chart using Bureau of Economic Analysts data
*2022 growth is an estimate by the Conference Board as official numbers for the full year are not yet available
market performance: Biden was unfortunate enough to be caught in the maelstrom of several headwinds weighing on the stock market. The stock market is often considered a barometer of a country’s economic health, as it reflects the fortunes of companies in sectors that often serve as the lifeblood of the economy.
The post-Covid-19 recovery that appeared in the stock market took the major US averages to record highs in 2022 and from there the descent was sharp, undercutting the average returns. S&P 500 for a period of two years.
SPDR S&P 500 ETF Trust DetectiveAn exchange-traded fund that tracks the performance of the S&P 500 index rose 5.3% during the two-year period under Biden.
Obama’s average two-year return during his second term was better than that of his two successors’ comparable measures.
source: self made chart
Popularity Rating: Biden started his presidency on a positive note from an approval rating perspective. Shortly after his inauguration, he enjoyed an approval rating of 53%, according to data compiled by FiveThirtyEight based on all polls. As of August 2021, the percentage of those who approve have fallen below those who disapprove. At the end of 2022, the ratio compared to that was 51.3% to 43.3%.
The comparison with Trump shows that Biden had the upper hand in terms of popularity in the first two-year period.
source: five thirty eight
Comparing FiveThirtyEight’s Biden Vs. Obama used combined data from the first two years of both Obama terms. It shows that Obama has a better approval rating than Biden over the entire period.
source: five thirty eight
Risky road ahead The US economy faces the prospect of a recession and uncertainty continues over the Fed funds rate trajectory. Geopolitical risks remain high, with the Russia-Ukraine war continuing and relations with China continuing to soften, threatening to flare up at any moment.
Additionally, with the midterms, Democrats have handed control of the House to Republicans, which could mean more wrangling over policy measures. One aspect where Biden won handily was a slew of legislation passed, taking advantage of his party’s control of Congress over the first two years.
Biden is likely to have a tough second half of his term and it remains to be seen how he and his party steer the economy and the nation through this challenging time.