Joe Biden entered the campaign in a deeply divided America. The legal twists and turns of Donald Trump, the removal of the Speaker of the House, and narrowly avoiding a Federal government shutdown are just a few examples. However, as Bill Clinton once said, everything will hinge on the state of the American economy in 2024.
In late September, Joe Biden raised the stakes by joining a strike organized by the UAW union in Michigan. Taking the megaphone on this occasion, he adopted an unprecedented position for a sitting President.
This extreme stance matches the high stakes for the forty-sixth President of the United States: in a context of budgetary confrontation, economic slowdown, and monetary tightening, the country’s economy may not turn out to be the asset hoped for in winning the rematch against Trump.
In any case, the Republicans have clearly understood this and are now positioning themselves firmly in a position of radical budgetary opposition to the current administration, fighting on every funding item for 2024, risking triggering a federal government shutdown. This was narrowly and temporarily avoided by a provisional agreement on September 30, 2023, just a few hours before the fiscal clock expired.
Because so far, Joe Biden, in this respect following in the footsteps of Donald Trump, has not hesitated to use the federal budget as a powerful tool to support the economy. Between July 2022 and August 2023, more than 5% of the country’s GDP was injected into the economy additionally through an expansion of the primary deficit.
Thanks to this very significant effort, activity has withstood the interest rate hikes. Our Montpensier Economic Momentum Indicator, at 48, is in stable territory, well above that of France or Germany.
Our MMS indicator for American economic growth momentum is much higher than that of France and Germany.
Source: Bloomberg / Montpensier Finance as of October 2, 2023
By Wilfrid Galand & Guillaume Dard