Biden aides weigh in on talk of recession

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WASHINGTON — Key members of the Biden administration on Sunday stressed their message that “a recession is not inevitable,” despite growing fears that the Federal Reserve’s aggressive actions to curb inflation could trigger an economic downturn.

“I don’t think a recession is at all inevitable,” Treasury Secretary Janet Yellen said on ABC News’ “This Week,” though she acknowledged that she expected some economic slowing. “Clearly, inflation is unacceptably high. It’s President [Joe] Biden’s top priority to bring it down.”

Yellen noted that Fed Chair Jerome Powell has pledged to control inflation while maintaining a robust job market. “That’s going to take skill and luck,” she said. “But I believe it’s possible.”

Still, the rising prices of essential consumer goods, gas and housing have squeezed Americans’ budgets. The burden has fallen disproportionately on the working class and the lower middle class, with many people in these groups already living paycheck to paycheck.

The downturn in the stock market, while not an indicator of the health of the economy, has also reflected these concerns. Last week, the major indexes slipped into bear market territory, down more than 20% from their highs. That is affecting investors’ psychology and retirement outlook.

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The Fed has aggressively increased interest rates in recent months to slow the rate of inflation, which hit a new peak in May. On Wednesday, the Fed raised interest rates by three-quarters of a percentage point, the highest such increase since 1994. In May, Fed leaders increased interest rates by half a percentage point.

Yellen cited the war in Ukraine and supply-chain issues caused by coronavirus-related lockdowns in China as primary drivers of inflation.

Economists outside the administration have pointed to government spending via the $1.9 trillion American Rescue Plan signed by Biden in March 2021 as partly responsible for rising prices. Republican critics see the relief plan as a political liability for the president and the Democratic Party ahead of the 2022 midterm elections.

In an interview with The Associated Press on Thursday, Biden pushed back against those blaming his administration for the high inflation, noting that it is an economic reality across the globe. He also said the United States is in a stronger position than other countries to combat inflation.

A recession is “not inevitable,” he said.

Energy Secretary Jennifer Granholm said on CNN’s “State of the Union” on Sunday that Biden was weighing whether to call for a federal gas tax holiday, which would give drivers relief at the pump, but she noted that revenue from the tax is used to improve roads.

She noted this summer would be difficult on drivers.

“Inflation, obviously, is happening globally,” Granholm said. But “a recession is not inevitable,” she added. “The president really wants to have a steady and stable recovery.”

Biden will travel to Saudi Arabia next month as part of a broader trip to the Middle East, during which Granholm said he is expected to meet with Crown Prince Mohammed bin Salman.

“He has asked for all suppliers around to the world to increase production. That includes OPEC, that includes our domestic oil and gas producers,” Granholm said.

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Brian Deese, director of the National Economic Council, said the administration is doing everything it can to combat inflation and can do so without pushing the country toward an economic slump.

“What I would say is that not only is a recession not inevitable, but I think that a lot of people are underestimating those strengths and the resilience of the American economy,” Deese said on CBS News’ “Face The Nation.”

Many critics have said the Fed should have acted sooner to stave off inflation.

Information for this article was contributed by Rosalind Helderman of The Washington Post.