Home Opinion Special Reports High Inflation and Political Dysfunction Characterized U.S. Economy in 2023

High Inflation and Political Dysfunction Characterized U.S. Economy in 2023

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U.S. Cold War mentality
U.S. Cold War mentality

The year 2023 will be remembered in the United States as a year of surging inflation and political dysfunction.

High grocery prices — caused by profligate government spending, as well as disruptions in the global grain and energy supply — have bedeviled Americans all year. Samantha Lehey, 74, a retiree in New Jersey, told Xinhua that she now has to spend 50 percent more on food than she did in 2019. That is difficult for her, as she’s on a fixed income, just like millions of other retirees across the country. It’s also hard for the middle- and lower-income earners nationwide. “Groceries are expensive now,” she said, adding that eggs, ground beef and butter have all gone up in price. It’s highly improbable that the United States will return to 2019 price levels, as a prolonged period of falling prices would need to occur, economists said. And for that to happen, the Russia-Ukraine crisis, which has put a strain on the grain supply, would need to be resolved.

High prices have “hurt consumers and harmed public confidence” in President Joe Biden’s policies, Brookings Institution Senior Fellow Darrell West told Xinhua.

It is evident that the U.S. economy has been surprisingly robust in terms of the labor market, with the unemployment rate in November edging down to 3.7 percent, which is higher than the recent low of 3.4 percent in April, but still close to the lowest on record, according to the country’s Bureau of Labor Statistics. But at the same time, nothing seems affordable anymore. The costs of rent, home prices and food have surged. Still, the inflation that began two years ago has been slowing.

Desmond Lachman, a senior fellow at the American Enterprise Institute and a former official at the International Monetary Fund, told Xinhua that inflation “appears to be on a clear downward path.” The core personal consumption expenditures (PCE) price index, which strips out volatile food and energy prices, rose 3.5 percent in October from a year ago, down from 3.7 percent in September. Twelve-month core PCE inflation peaked at 5.6 percent in February 2022. The downward trend of inflation “has been faster than almost anyone thought possible,” Dean Baker, senior economist at the Center for Economic and Policy Research, told Xinhua.

Since this year, the U.S. Federal Reserve has slowed its pace in tightening monetary policy, as inflation has cooled from its peak in 2022, leaving the interest rates unchanged at a 22-year high of 5.25-5.5 percent.

POLITICAL DYSFUNCTION

The year was also marked by the unprecedented ouster of Kevin McCarthy from the position of House Speaker, just nine months after he struggled to win the gavel in a dramatic 15-round floor fight in January. Amid intensifying intra-party fighting between moderates and conservatives, the Republican Speaker was booted out in a vote led by members of his own party. That occurred after he stirred the ire of some conservative Republicans by cutting a deal with Democrats to avert a partial federal government shutdown. At the heart of the matter is the surging federal budget.

The U.S. federal government recorded a budget deficit of nearly 1.7 trillion U.S. dollars in fiscal year 2023, which ended in September, up 23.2 percent from the previous fiscal year. This adds to the country’s already ballooning federal debt, which exceeded a staggering 33.8 trillion dollars. “The continued political dysfunction in Washington … has put the public finances on an unsustainable path,” Lachman said, noting that there is an 8 percent of gross domestic product (GDP) budget deficit. He added that “public debt … is well on its way to exceed the level recorded during the Second World War.”

The historic ouster of a sitting House speaker, as well as three weeks of failed attempts to elect a new speaker, also underscored the harsh partisanship that has characterized Washington for over a decade. “The ouster of a Republican Speaker shows how contentious American politics has become and the bitter divisions between and within the two major parties,” West said.

Louisiana Republican Rep. Mike Johnson, vice chairman of the U.S. House Republican conference, was elected the new House speaker on Oct. 25, bringing weeks of chaos to a momentary halt. The House had never been speakerless for so long mid-session, The Washington Post said in an analysis, noting that the House was already operating at an unusually unproductive pace. “It will be important to watch how the new speaker negotiates with others and addresses key problems going forward,” West said.

BIDEN SINKS IN POLLS

Meanwhile, the year has seen President Biden’s popularity fall. An NBC poll last month found that Biden’s popularity stands at its lowest in his presidency amid the Israel-Palestine conflict, with most voters viewing him in a “negative” light. A mere quarter of Americans want the embattled president to run again, according to an Economist/YouGov poll last month. Many Americans harbor concerns over the 81-year-old president’s cognitive health. Less than a year ahead of the 2024 presidential election, the U.S. president will be fighting a Republican impeachment bid while his son Hunter Biden, the first child of a sitting president to be criminally indicted, struggles to avoid prison due to tax- and gun-related cases.

As of now, no substantiated evidence has surfaced to show that President Biden, in his current or past official capacities, engaged in the misuse of his position or accepted illicit payments. However, ethical concerns have been raised regarding the international business dealings of the Biden family. “It is the widespread disillusionment that any government operating under the current inept rules will accomplish nothing of use to the average citizen that I find most worrisome,” Greg Cusack, a former member of the Iowa House of Representatives and a longtime Democrat, told Xinhua. “It is this sentiment that I think is behind the reported serious erosion of support for Biden among not only people of color but also among the young,” Cusack said.

On the Republican side, the race has been dominated by former President Donald Trump, despite the four criminal indictments he faces. With Trump taking the lead, former Vice President Mike Pence and Tim Scott, a U.S. senator from South Carolina, among others, recently dropped out of the 2024 Republican presidential race. Cusack believes that Trump could be a “wildcard.” “He had supported the Republicans in moving to shut down the government, and he has been allied with the extremists all year. With him cheering them on, and with his using the multiple courtroom trials he is facing to continue to inflame his ‘loyal’ supporters, who knows what this volatile combination will produce?” said Cusack. A NYT/Siena poll showed Trump winning against Biden in five out of six key swing states. The year 2023, marked by surging inflation and political turmoil, will almost certainly have a major impact on next year’s race for the White House.

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