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      U.S. Economy Grew at 3.3% Rate in Latest Quarter

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      The increase in gross domestic product, while slower than in the previous period, showed the resilience of the recovery from the pandemic’s upheaval.The U.S. economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled and a widely predicted recession never materialized.Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said on Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval.The latest reading is preliminary and may be revised in the months ahead.Forecasters entered 2023 expecting the Federal Reserve’s aggressive campaign of interest-rate increases to push the economy into reverse. Instead, growth accelerated: For the full year, measured from the end of 2022 to the end of 2023, G.D.P. grew 3.1 percent, up from less than 1 percent the year before and faster than in any of the five years preceding the pandemic. (A different measure, based on average output over the full year, showed annual growth of 2.5 percent in 2023.)There is little sign that a recession is imminent this year, either. Early forecasts point to continued — albeit slower — growth in the first three months of 2024. Layoffs remain low, and job growth has held steady. Cooling inflation has meant that wages are again rising faster than prices. And consumer sentiment is at last showing signs of rebounding after years in the doldrums.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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      Why Americans Are Feeling Better About the Economy

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      In 2022, Republicans seemed to have an easy path to regaining the White House, no actual policy proposals required. All they had to do was contrast Donald Trump’s economic record — which they portrayed as stellar — with the lousy economy under President Biden.That rosy view of the Trump economy involved a lot of selective forgetting — more about that in a minute. But the Biden economy was indeed troubled for much of 2022, with the highest inflation in 40 years. Jobs were plentiful, with unemployment near a 50-year low, but many economists were predicting an imminent recession.Since then, however, two terrible things have happened — terrible, that is, from the point of view of Republican partisans. First, the economy has healed: Inflation has plunged without any major rise in unemployment. Second, Americans finally seem to be noticing the good news.Before I get to that, however, let’s talk for a second about Biden’s predecessor. How can people claim that Trump presided over a great economy when he was the first president since Herbert Hoover to leave the White House with fewer Americans employed than when he arrived?We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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      Trump Dreams of Economic Disaster

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      Did Donald Trump just say that he’s hoping for an economic crash? Not exactly. But what he did say was arguably even worse, especially once you put it in context.And Trump’s evident panic over recent good economic news deepens what is, for me, the biggest conundrum of American politics: Why have so many people joined — and stayed in — a personality cult built around a man who poses an existential threat to our nation’s democracy and is also personally a complete blowhard?So what did Trump actually say on Monday? Strictly speaking, he didn’t call for a crash, he predicted one, positing that the economy is running on “fumes” — and that he hopes the inevitable crash will happen this year, “because I don’t want to be Herbert Hoover.”If you think about it, this isn’t at all what a man who believes himself to be a brilliant economic manager and supposedly cares about the nation’s welfare should say. What he should have said instead is something like this: My opponent’s policies have set us on the path to disaster, but I hope the disaster doesn’t come until I’m in office — because I don’t want the American people to suffer unnecessarily, and, because I’m a very stable genius, I alone can fix it.But no, Trump says he wants the disaster to happen on someone else’s watch, specifically and openly so that he won’t have to bear the responsibility.Speaking of which, when did Trump start predicting economic disaster under President Biden? The answer is before the 2020 election. In October 2020, for example, he asserted that a Biden win would “unleash an economic disaster of epic proportions.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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      Why Donald Trump Will Soon Be Attacking the Fed

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      Interest rates are heading down. Maybe not today, and maybe not tomorrow, but soon, and for the rest of this year (at least).Why? Because there are very good reasons for the Federal Reserve, which controls short-term interest rates — that’s how it makes monetary policy — to start reversing the sharp rate hikes it carried out beginning in March 2022. There’s a vigorous debate about whether those rate hikes were excessive, which I’m not going to litigate here. Whatever you think about past policy, the case for cuts going forward is very strong, and I hope the Fed will act on that case.What I don’t know is whether the Fed is ready for the political firestorm it’s about to face, and whether it will stand up to the pressure to keep rates too high for too long. Because it’s a safe prediction that Donald Trump and his supporters will scream that the coming rate cuts are part of a deep-state conspiracy to re-elect President Biden.Let’s talk first about the economics, which should — but might not — be the only thing guiding the Fed’s decisions.The Fed raised rates in an attempt to rein in inflation, which was running hot at the time — its preferred measure of underlying inflation was running far above its target rate of 2 percent. It kept raising rates until the middle of 2023, trying to cool off the economy and ensure that inflation came down.As it turns out, the economy still hasn’t cooled much, at least by the usual measures; the unemployment rate remains near a 50-year low. But inflation has plunged. Over the past six months, the core personal consumption expenditures deflator — try saying that five times fast — has risen at an annual rate of only 1.9 percent, below the Fed’s target, and more complex measures are close to 2 percent. Basically, the war on inflation is more or less over, and we won.So why keep interest rates this high? Right now the labor market looks a lot like it did on the eve of the pandemic, with both unemployment and other measures of market heat, like the rate at which workers are quitting, similar to what they were in late 2019. The Fed is projecting higher inflation over the next year than it was in 2019, but only slightly higher.Back then, however, the federal funds rate — the interest rate the Fed controls — was 1.75 percent. Now it’s 5.5 percent. It’s really hard to come up with a good reason it should stay that high.True, high rates haven’t produced a recession — yet. But there are hints of economic weakness, and the Fed is supposed to try to get ahead of the curve. So it’s time to start cutting rates.But rate cuts will have political implications. They will be good for Biden, although not exactly for the reasons you might think.I don’t know what the unemployment rate or the rate of economic growth will be in November, but because monetary policy works with a lag, what the Fed does in the next few months won’t have much effect on these numbers.Biden, however, is already presiding over a very good economy by normal standards, with solid job growth and plunging inflation. What he needs is for more Americans to accept the good news. And Fed rate cuts will help him with that. They will signal to the public that inflation really is under control; they will lead, other things being equal, to higher stock prices and lower mortgage rates.So we can expect howls from Trump and his allies that politics, not economics, is driving the coming rate cuts — even though Trump himself appointed Jerome Powell, the Fed’s chair.Why do we know this will happen? Partly because paranoia is MAGAworld’s normal condition: It sees sinister conspiracies everywhere.Beyond that, Trump and his allies constantly engage in projection, assuming that their opponents are doing or will do what they themselves would do or have done, like weaponizing the Justice Department for Trump’s own political ends.And when it comes to interest rate policy, Trump has a track record of doing exactly what I’m sure he will accuse Biden of doing: trying to manipulate the Fed. Ever since Richard Nixon pressured the Fed to keep rates low in 1972, possibly helping to set the stage for the stagflation that followed, it has been traditional for the White House to respect the Fed’s independence. But in 2019 Trump attacked Powell and his colleagues as “boneheads” and demanded that they cut interest rates to “ZERO, or less.”So we know that Trumpist attacks on the Fed for cutting interest rates are coming. What we don’t know is how the Fed will react.In a recent dialogue with me about the economy, my colleague Peter Coy suggested that the Fed may be inhibited from cutting rates because it’ll fear accusations from Trump that it’s trying to help Biden. I hope Fed officials understand that they’ll be betraying their responsibilities if they let themselves be intimidated in this way.And I hope that forewarned is forearmed. MAGA attacks on the Fed are coming; they should be treated as the bad-faith bullying they are.The Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow the New York Times Opinion section on Facebook, Instagram, TikTok, X and Threads. More

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      Will the Economy Help or Hurt Biden ’24? Krugman and Coy Dig Into Data.

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      Peter Coy: Paul, I think the economy is going to be a huge problem for President Biden in 2024. Voters are unhappy about the state of the economy, even though by most measures it’s doing great. Imagine how much unhappier they’ll be if things get worse heading into the election — which I, for one, think is quite likely to be the case.Paul Krugman: I’m not sure about the politics. We can get into that later. But first, can we acknowledge just how good the current state of the economy is?Peter: Absolutely. Unemployment is close to its lowest point since the 1960s and inflation has come way down. That’s the big story of 2023. But 2024 is a whole ’nother thing. I think there will be two big stories in 2024. One, whether the good news continues, and two, how voters will react to whatever the economy looks like around election time.Paul: Right now many analysts, including some who were very pessimistic about inflation last year, are declaring that the soft landing has arrived. Over the past six months the core personal consumption expenditures deflator — a mouthful, but that’s what the Federal Reserve targets — rose at an annual rate of 1.9 percent, slightly below the Fed’s 2 percent target. Unemployment is 3.7 percent. The eagle has landed.Peter: I question whether we’ve stuck the soft landing. I do agree that right at this moment things look really good. While everyone talks about the cost of living going up, pay is up lately, too. Lael Brainard, Biden’s national economic adviser, points out that inflation-adjusted wages for production and nonsupervisory workers are higher now than they were before the Covid pandemic.So let’s talk about why voters aren’t feeling it. Is it just because Biden is a bad salesman?Paul: Lots of us have been worrying about the disconnect between good numbers and bad vibes. I may have been one of the first people to more or less sound the alarm that something strange was happening — in January 2022! But we’re all more or less making this up as we go along.The most informative stuff I’ve seen recently is from Briefing Book, a blog run by former White House staffers. They’ve tried to put numbers to two effects that may be dragging consumer sentiment down.One effect is partisanship. People in both parties tend to be more negative when the other party controls the presidency, but the Briefing Book folks find that the effect is much stronger for Republicans. So part of the reason consumer sentiment is poor is that Republicans talk as if we’re in a depression when a Democrat is president, never mind reality.Peter: That is so true. And I think the effect is even stronger now than it used to be because we’re more polarized.Paul: The other effect affecting consumer sentiment is that while economists tend to focus on relatively recent inflation, people tend to compare prices with what they were some time in the past. The Briefing Book estimates suggest that it takes something like two years or more for lower inflation to show up in improved consumer sentiment.This is one reason the economy may be better for Democrats than many think. If inflation really has been defeated, many people haven’t noticed it yet — but they may think differently a little over 10 months from now, even if the fundamentals are no better than they are currently.I might add that the latest numbers on consumer sentiment from several surveys have shown surprising improvement. Not enough to eliminate the gap between the sentiment and what you might have expected from the macroeconomic numbers, but some movement in a positive direction.Peter: That makes sense. Ten months from now, people may finally be getting over the trauma of high inflation. On the other hand, and I admit I’m not an economist, I’m still worried we could have a recession in 2024. Manufacturing is soft. The big interest rate increases by the Fed since March 2022 are hitting the economy with a lag. The extra savings from the pandemic have been depleted. The day after Christmas, the Federal Reserve Bank of St. Louis said the share of Americans in financial distress over credit cards and auto loans is back to where it was in the depths of the recession of 2007-9.Plus, I’d say the labor market is weaker than it looked from the November jobs report. (For example, temp-agency employment shrank, which is an early warning of weak demand for labor.)Also, small business confidence remains weak.Paul: Glad you brought up small business confidence — I wrote about that the other week. “Hard” indicators like hiring plans are pretty strong. “Soft” indicators like what businesses say about future conditions are terrible. So small businesses are in effect saying, “I’m doing OK, and expanding, but the economy is terrible” — just like consumers!I’m not at all sure when the Fed will start cutting, although it’s almost certain that it eventually will, but markets are already effectively pricing in substantial cuts — and that’s what matters for the real economy. As I write this, the 10-year real interest rate is 1.69 percent, down from 2.46 percent around six weeks prior. Still high compared with prepandemic levels, but financial conditions have loosened a lot.Could there be a recession already baked in? Sure. But I’m less convinced than I was even a month ago.Peter: The big drop in interest rates can be read two ways. The positive spin is that it’ll be good for economic growth, eventually. That’s how the stock market is interpreting it. The negative spin is that the bond market is expecting a slowdown next year that will pull rates down. Also, what if the economy slows down a lot but the Fed doesn’t want to cut rates sharply because Fed officials are afraid of being accused by Donald Trump of trying to help Biden?Paul: I guess I think better of the Fed than that. And always worth remembering that the interest rates that matter for the economy tend to be driven by expectations of future Fed policy: The Fed hasn’t cut yet, but mortgage rates are already down substantially.Peter: Yes.Paul: OK, about the election. The big mystery is why people are so down on the economy despite what look like very good numbers. At least part of that is that people don’t look at short-term inflation, but at prices compared with what they used to be some time ago — but people’s memories don’t stretch back indefinitely. As I said, the guys at Briefing Book estimate that the most recent year’s inflation rate is only about half of what consumers look at, with a lot of weight on earlier inflation. But here’s the thing: Inflation has come way down, and this will gradually filter into long-term averages. Right now the average inflation rate over the past 2 years was 5 percent, still very high; but if future inflation runs at the 2.4 percent the Fed is now projecting, which I think is a bit high, by next November the two-year average will be down to 2.7 percent. So if the economy stays where it is now, consumers will probably start to feel better about inflation.Peter: Except that perceptions of inflation are filtered through politics. Food and gasoline are more expensive for Trump supporters than Biden supporters, if you believe what people tell pollsters. That’s not going to change between now and November.The Obama-Biden ticket beat the McCain-Palin ticket in 2008 because voters blamed Republicans for the 2007-9 recession. Obama-Biden had a narrower win in 2012 against Romney-Ryan, and I think one factor was the so-called jobless recovery from that same recession. That’s why Biden is supersensitive about who gets credit and blame for turns in the economy.For the record, Trump might be president right now if it hadn’t been for the Covid pandemic, which sent the unemployment rate to 14.7 percent in April 2020. The economy was doing quite well before that happened. A lot of Republicans are nostalgic for Trumponomics, although I think the economy prospered more in spite of him than because of him. Thoughts?Paul: Most of the time, presidents have far less effect on the economy than people imagine. Big stimulus packages like Barack Obama’s in 2009 and Biden’s in 2021 can matter. But aside from pandemic relief, which was bipartisan, nothing Trump did had more than marginal effects. His 2017 tax cut didn’t have much visible effect on investment; his tariffs probably on net cost a few hundred thousand jobs, but in an economy as big as America’s, nobody noticed.Peter: Just speculating, but I wonder if when people say they trust Trump more than Biden on the economy, they’re feeling vibes more than parsing statistics. You know, “We need a tough guy in the White House!”Paul: People definitely aren’t parsing statistics. Only pathetic nerds like us do that. And while Trump wasn’t actually a tough economic leader, he literally did play one on TV.But we don’t really know if that matters, or whether people are still reacting to the shock of inflation and high interest rates, which they hadn’t seen in a long time. Again, the best case for Biden pulling this out is that voters get over that shock, with both inflation and interest rates rapidly declining.Oh, and falling interest rates mean higher bond prices, and often translate into higher stock prices, too — which has also been happening lately.Peter: True, Paul. But cold comfort for people who don’t own stocks and bonds. Or who do own stocks and bonds in their retirement plans but don’t think of themselves as part of the capitalist class. To win in November, Biden and his team are going to need to be perceived as doing something for the working class and the middle class. That’s why you see the White House talking about eliminating junk fees and capping insulin prices.Paul: For what it’s worth, I think a lot of people judge the economy in part by the stock market, even if they don’t have a personal stake. That’s why Trump boasted about it so much, and has lately been trying to say that Biden’s strong stock market is somehow a bad thing.Finally, there are some indications that Democrats in particular are feeling better about the Biden economy. The Michigan survey tracks sentiment by partisanship. The numbers are noisy, but over the past few months Democratic sentiment has been slightly more positive than it was in the months just before the pandemic struck.Peter: Paul, how important do you think the economy will be to voters compared to other issues, such as Trump’s fitness for office, Biden’s age, abortion access, et cetera? I mean, if it’s not important, why are we even having this conversation?Paul: The economy surely matters less than it did when Republicans and Democrats lived in more or less the same intellectual universe — everyone agreed that the economy was bad in 1980 or 2008; now, Dems are fairly positive while Republicans claim to believe that we’re in a severe downturn. But there are still voters on the margin, and weak Democratic supporters who will turn out if they have a sense that things are improving.Peter: Democratic strategists think the election might come down to Pennsylvania and Wisconsin, assuming that Biden holds Michigan and New Hampshire and loses Arizona and Georgia. Any thoughts about the economic outlook for Pennsylvania and Wisconsin?Paul: No strong sense about either state. But one little-noticed fact about the current economy is how uniform conditions are. In 2008, so-called sand states that had big housing bubbles were doing much worse than states that didn’t; now unemployment is low almost everywhere.Of course, all political bets are off if we have a recession. But there’s a reasonable case that the economy will be much less of a drag on Democrats by November, as the reality of a soft landing sinks in.Oh, and my subjective sense is that for whatever reason, media coverage of the economy has turned much more positive lately. I have to think this matters, otherwise, what are we even doing? And until recently, media reports tended to emphasize the downsides — “Great jobs numbers, and here’s why that’s bad for Biden” has become a sort of running joke among people I follow. These days, however, we’re starting to see reports acknowledging that we’ve had an almost miraculous combination of strong employment and falling inflation.Peter: Paul, what economic indicators will you be paying the most attention to in the next few months with regard to the election? I’ll nominate inflation and unemployment, although those are kind of obvious.Paul: Unemployment, for sure. On inflation, I’ll be watching longer-term measures: Will inflation be low enough to bring down two- or three-year averages? And especially highly visible stuff, like groceries. Thanksgiving dinner was actually cheaper in 2023 than in 2022. Will grocery prices be subdued enough to reduce the amount of complaining?Oh, and I’ll be looking at consumer sentiment, which as we’ve seen can be pretty disconnected from the economy but will matter for the election.Peter: Happy New Year!Source photographs by Caroline Purser and Anagramm/Getty ImagesThe Times is committed to publishing a diversity of letters to the editor. We’d like to hear what you think about this or any of our articles. Here are some tips. And here’s our email: letters@nytimes.com.Follow the New York Times Opinion section on Facebook, Instagram, TikTok, X and Threads. More

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      Wall Street strategists’ bull and bear scenarios for 2024.

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      Wall Street’s forecasts mostly missed this year’s bull market rally. Here’s what strategists are saying about 2024.Last November and December, veteran stock market watchers forecast that 2023 would be a year to forget. They saw high inflation, a looming global recession and rising interest rates as sapping households’ buying power and denting corporate profits. For investors, they penciled in paltry gains and one of the worst performances for the S&P 500 in the past 15 years.But the market pros got the story only partly right. While interest rates did climb to a near two-decade peak, the S&P 500 has surprisingly soared to a near record high. Fueled partly by a rally in the so-called Magnificent Seven megacap tech stocks, it’s risen nearly 25 percent this year, as of Thursday’s close, shaking off a banking crisis, wars in the Middle East and Ukraine, and slowing growth in China’s economy.Crypto managed to do even better. Bitcoin bulls have swept aside a legal crackdown against the industry’s biggest players to fuel an impressive rally. The digital token has gained more than 150 percent this year, making it one of the best performing risky assets.“Twenty twenty-three was a great year for the contrarians,” David Bahnsen, the founder and chief investment officer of the Bahnsen Group, a wealth management firm, told DealBook. “You had macroeconomic concerns a year ago that didn’t come to bear, and you had valuation and financial concerns that didn’t come to bear. And it’s particularly ironic that it didn’t, because actually everything investors feared a year ago got worse.”Wall Street’s outlook for 2024 is rosier. Analysts see lower borrowing costs, a soft landing (that is, an economic slowdown that avoids a recession) and a pretty good year for investors.But if 2023 taught the market pros anything, it’s that forecasts can look out of date pretty fast. A slew of things could disrupt the markets in the year ahead — inflation creeping up again, or not, is one big factor to watch. And there are wild cards, too, with voters expected to head to the polls in over 50 countries next year, including the U.S.Here’s how Wall Street sees 2024 playing out:The bull caseThe median year-end 2024 forecast for the S&P 500 is 5,068, according to FactSet. Such a level would imply an annualized gain of roughly 6 percent for 2024.Bank of America’s equity strategists, led by Savita Subramanian, are among those in the bullish camp. In their annual forecast, they said that the S&P 500 would be likely to close out next year at 5,000, helped by a kind of “goldilocks” scenario of falling prices and rising corporate profits.Goldman Sachs is even more upbeat. Its analysts upgraded their year-end 2024 call on the S&P 500 to 5,100. They made the change after the Fed’s surprise statement on Dec. 13 that the equivalent of three interest-rate cuts were on the table for next year. Lower borrowing costs tend to give consumers and businesses more spending power, which could help Corporate America’s bottom line.Another catalyst: Investors this year put far more money into safe interest-rate sensitive assets, like money market funds, than they did into stocks. That logic could be flipped on its head in 2024. “As rates begin to fall, investors may rotate some of their cash holdings toward stocks,” David Kostin, the chief U.S. equity strategist at Goldman Sachs, said in a recent investor note.The bear caseOn the more pessimistic side is JPMorgan Chase, which carries a 2024 year-end target of 4,200. Its analysts team, led by Marko Kolanovic, the bank’s chief global market strategist, sees a struggling consumer with depleted savings, a potential recession and geopolitical uncertainty that could push up commodity prices, like oil, and push down global growth.The year ahead will be “another challenging year for market participants,” Kolanovic said. (Most strategists are even more downbeat on Europe, where recession fears are more acute. On the flip side, equities in Asia could show another year of solid growth, especially in India and Japan, Wall Street analysts say.)Lee Ferridge, the head of multi-asset strategy for North America at State Street Global Markets, is more optimistic about the American consumer, but points to a different challenge for investors. “If I’m right, the economy stays stronger. But then that’s a double-edged sword for equities,” he said. The prospect of robust consumer and business spending poses an inflation risk that could force the Fed to hold rates higher for longer, and even pause cuts, he said. “That’s going to be a headwind for equities.”“I wouldn’t be surprised to see a fairly flat year next year,” he added. “If we are up, it’s going to be the Magnificent Seven that are the drivers again.”The wild card: politics and the electionsPresidential elections are not rally killers, according to market analysis by LPL Financial that looks at the past 71 years. In that period, the S&P has risen, on average, by 7 percent during U.S. presidential election years. (The market tends to do even better in a re-election year, the financial advice firm notes.)Even with some uncommon questions swirling over next year’s contest — Will a mountain of legal troubles derail the Republican front-runner, Donald Trump? Will President Biden’s sagging polling ratings open the door for a strong third-party challenger? Will the election result be disputed, causing a constitutional crisis? — that’s unlikely to add much volatility to the markets, Wall Street pros say.“The election will not be a story in the stock market, up until November 2024, for the simple reason that the stock market will not know who’s going to win the election until November 2024,” Bahnsen said.His advice: Don’t even try to game out the election’s impact on the markets. More

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      Donald Trump Still Wants to Kill Obamacare. Why?

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      Donald Trump hasn’t talked much about policy in this election cycle, except for vague assertions that he’ll somehow bring back low unemployment and low inflation — which, by the way, has already happened. (Unemployment has been at or below 4 percent for almost two years. Thursday’s report on consumer spending showed the Federal Reserve’s preferred measure of underlying inflation getting close to its 2 percent target.) Most of his energy seems to be devoted to the prospect of wreaking revenge on his political opponents, whom he promises to “root out” like “vermin.”Nonetheless, over the past few days, Trump has declared that if he returns to the White House, he’ll once again seek to do away with the Affordable Care Act, the reform that has produced a significant decline in the number of Americans without health insurance.Why this renewed assault? “Obamacare Sucks!!!” declared the former and possibly future president. For those offended by the language, these are Trump’s own words, and I think I owe it to my readers to report what he actually said, not sanitize it. Trump also promised to provide “MUCH BETTER HEALTHCARE” without offering any specifics.So let’s discuss substance here. Does Obamacare, in fact, suck? And can we believe Trump’s promise to offer something much better?On the latter question, remember that Trump and his allies came very close to killing the A.C.A. in 2017 and replacing it with their own plan — and the Congressional Budget Office did a detailed analysis of the legislation that almost passed. The budget office predicted that by 2026, the Republican bill would cause 32 million people to lose health insurance, and that the premiums paid by individuals buying their own insurance (as opposed to getting it through their employers) would double.There is, as far as I can tell, no reason to believe that Trump has come up with a better plan since then, or that a new analysis of his plan would be any less dismal.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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      The Fed’s Decisions Now Could Alter the 2024 Elections

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      The state of the economy will affect voting next November, and the Federal Reserve may find itself in a delicate position, our columnist says.What’s happening in the economy now will have a big effect — perhaps, a decisive one — on the presidential election and control of Congress in 2024.To a remarkable extent, the economy is what matters to voters, so much so that one long-running election model relies on economic data to produce accurate predictions without even considering the identities, personalities, popularity or policies of candidates, or the strategies, messaging or dirty tricks of their campaigns.Right now, that model, created and run by Ray Fair, a Yale economist, shows that the 2024 national elections are very much up for grabs.The economy is strong enough for the incumbent Democrats to win the popular vote for the presidency and Congress next year, Professor Fair’s projections find. But it’s not a slam dunk. Persistent — though declining — inflation also gives the Republicans a reasonable chance of victory, the model shows. Both outcomes are within the model’s margin for error.It means small shifts in the economy could have an outsize influence on the next elections. That could put the Federal Reserve in a hot spot, even if the central bank tries to avoid it.The Fed strives to be independent. But policymakers’ decisions over the next 12 months could conceivably decide the elections.The Fair ModelProfessor Fair’s pioneering U.S. elections model does something that was fairly radical when he created it in the 1970s.It analyzes politics without really considering politics.Instead, Professor Fair focuses on economic growth, inflation and unemployment. With a few tweaks through the years, he has used economics to analyze elections since 1978, based on data for elections going back to 1916.What he’s found is that the economy sets the climate for national elections. The candidates and the political parties must live within it.Professor Fair makes his econometric models available on his website as teaching tools.“I encourage people to plug in their own assumptions and see how that will change the outcome,” he said.Professor Fair doesn’t even try to predict final election results. Just for a start, he doesn’t do state-by-state tallies or electoral college projections, or examine the potential impact of third-or fourth-party candidacies.But what his model does extremely well is provide a standard, historically based framework for understanding economic effects on the popular vote for the two main American political parties.What the model is showing is that the economy’s surprisingly strong growth and low unemployment since the start of the Biden presidency have already helped the incumbents considerably, while the uncomfortably high inflation levels during the period have helped the Republicans. Based on the history embedded in the model, if these critical economic factors shift, there’s room for a decisive change in the popular vote. But probably not much room.The Inflation EffectThere was jubilation on Wall Street over the past week over the positive news about inflation. The overall Consumer Price Index for October dropped to 3.2 percent annually from 3.7 percent the previous month — and from a peak, in this business cycle, of 9.1 percent in June 2022. At the same time, core inflation, which excludes fuel and food prices, fell to 4 percent in October, the smallest increase since September 2021.Inflation is still running well above the Fed’s target of 2 percent, but it’s declining, and traders are assuming that, at the very least, Fed officials won’t need to raise interest rates at their next meeting, in December. And there’s more.The Wall Street consensus, which is captured by the futures market, is that further encouraging inflation news will be coming, and that the Fed will start lowering rates by the spring. The sooner the Fed acts, this thinking goes, the more likely it is that a significant increase in unemployment — and a full-blown recession — can be avoided.There are political implications.Because interest rate cuts have lagged effects on the economy, the sooner such cuts occurred, the more likely it would be that the economy surged before next year’s election. An increase in economic growth in the first nine months of an election year — without a spike in unemployment — would help the presidential incumbent’s party, Professor Fair’s model shows. (If Republicans controlled the White House now, strong economic growth would help them more than it does the Democrats, history and the Fair model suggest.)On the other hand, a decline in inflation won’t help the Democrats much at this stage, Professor Fair said, because high inflation has already been baked into the vote prediction — and, presumably, into voters’ consciousness. The model averages the first 15 quarters — or 45 months — of a presidential administration, and we are already in the 11th quarter of the Biden presidency.For the overall inflation effect to diminish considerably, the basic math requires actual sustained deflation — a continuing fall in prices — in the months ahead. Historically, that has only happened during major economic declines, accompanied by soaring unemployment, as was the case in the Great Depression. A major recession would probably mean a Democratic debacle next year.A Looming NightmareBut a major recession in the next 12 months is not the consensus view among economists or in financial markets.Instead, a more benign prospect beckons. The probability of a “soft landing” — a decline in inflation without a recession — has grown in most forecasters’ estimations.But for the political outlook and for the Fed, the timing is tricky.A growth surge that is not accompanied by a big increase in unemployment would help the incumbent party, and large rate cuts by the Fed might well set off more economic growth. But the Fed will be reluctant to start reducing interest rates while inflation is still above 3 percent. Instead, as long as inflation is high, the Fed has vowed to keep interest rates “higher for longer,” and, in effect, it already has.Since July, short-term rates have stayed above 5.25 percent, mortgage rates are still above 7.5 percent and consumer borrowing is straitened. The longer this goes on, the greater the chances of a calamity in the financial system. Yet if the Fed eases interest rates too soon, and sets off another wave of inflation, the damage to its already tarnished reputation as an effective inflation-fighter would be severe.So the Fed is in a difficult spot. If the central bank doesn’t start to lower interest rates by the summer, it could be reluctant to do so at all in the autumn, because it would inevitably be seen as taking a partisan stance.As Ian Shepherdson, chief economist of the research firm Pantheon Macroeconomics, said in an online discussion, “there’s a lot hanging on the timing” of the inflation data in the weeks ahead. If the inflation issue isn’t resolved soon, he said, we will have to deal with “the nightmare of whether the Fed wants to be starting a shift in the policy cycle as the election approaches.”Incumbent presidents always want the economy to look great on Election Day. The one case in which it is well documented that a president put pressure on a Federal Reserve chairman to cut rates — and the central bank did so — involved President Richard M. Nixon and Arthur F. Burns in late 1971 and 1972. Mr. Nixon didn’t limit his improper actions to browbeating the Fed. There was also the Watergate break-in at the Democratic National Committee headquarters, and the subsequent cover up. An investigation revealed the secret White House taping system — which recorded Mr. Nixon’s rough treatment of Mr. Burns.But there is substantial evidence of other instances of presidents and their emissaries trying to influence the Fed, without success. President Donald J. Trump repeatedly berated the current Fed chair, Jerome H. Powell, for not lowering rates sufficiently. President Lyndon B. Johnson bullied William McChesney Martin to the point of physically manhandling him. And Paul Volcker revealed that, in President Ronald Reagan’s presence, James Baker, the chief of staff, told Mr. Volcker that the president “wants to give you an order”: Don’t raise rates as the 1984 election approaches. Mr. Volcker said Mr. Reagan looked on silently.In an oral history, Mr. Volcker said the meeting occurred in the White House library, not the Oval Office, probably to protect the president. “Whatever taping machines they had were probably not in the library,” Mr. Volcker said. “I didn’t want to say that we were going to raise rates,” Mr. Volcker recalled, “because we weren’t so as near as I can recall, I said nothing.”Mr. Powell has said he considers Mr. Volcker to be a role model. Generous and forthcoming in private conversations, Mr. Volcker was sometimes taciturn in public. It will be wise to emulate that reticence at critical moments in the months ahead.The Fed needs to be seen as independent and tough, and to squelch inflation, as Mr. Volcker did. Then, quite likely, it will need to cut rates aggressively to help the economy.The calendar may not cooperate. The tougher the Fed is now, the more delicate its position will become as the election approaches. More