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Can work offset wealth?


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Ed, let me start by saying that it was wonderful to see you in person this past Saturday at the FT Weekend Festival in DC, where you took the big stage to discuss big ideas with CIA director William Burns and former secretary of state Henry Kissinger, while former US trade representative Robert Lighthizer and I duked it out with the FT’s own chief economics commentator Martin Wolf over US-China decoupling. I also discussed the rise and fall of financial dynasties with Joseph Sassoon. There were not only political and economic stars but many cultural ones in attendance, too. Check out Tina Brown on the royals, Chimamanda Ngozi Adichie and Elizabeth Strout on their own recent work, and plenty of other highlights from the festival, here.

Moving on from our very fun weekend, I have in mind a sober topic — the delicate balancing act that Democrats must orchestrate, in advance of the midterms, between preserving both work and wealth. Last Friday’s jobs numbers were red hot; nearly every part of the economy, from manufacturing to tourism, retail to construction, was up. But of course, that means inflation is too. The predictable dichotomy between Main Street and Wall Street played out, as the strong employment numbers led to a plunge in share prices.

It’s amazing to me how good news in the real world is always bad news in the markets. I shouldn’t be surprised — I wrote a whole book on the disconnect between the markets and the real economy. I’ve always wanted an administration that would think more about “work, not wealth,” just as this White House does. But now that we are at a pivot point between the two, it presents a real conundrum for President Joe Biden and for Democratic members of Congress running for re-election in the autumn.

Their economic strategies over the past two years, which included strong stimulus to help buffer the pandemic, have paid off with employment that is basically back to where it was pre-Covid-19. But all the average voter sees is double-digit energy price hikes and high single-digit spikes in groceries.

Biden is rightfully calling out Russian President Vladimir Putin’s war and supply chain issues for some of the inflation. But the truth is that stimulus added heat to the economy, which makes it so easy for Republicans to point the finger at the White House when talking up inflation. Never mind that 40 years of low rates and a nine-fold expansion of the Fed’s balance sheet since 2008 under both Republicans and Democrats (see our colleague Gillian Tett’s piece on that here) are the real issue. All that easy money baked high inflation into the economy. It was only a matter of time before the bill came due.

What happens now? Probably a major stock market correction, perhaps in advance of the midterms. Democrats will be blamed, unfairly. I honestly think that Biden should try to get out in front of that with a “fireside chat”- type broadcast to the American people and tell them, in plain language, what’s going on. He should just tell the truth: that both Republicans and Democrats passed the buck to the Federal Reserve for years, trying to avoid a guns and butter style debate over tough fiscal choices; that as the Fed starts to unwind its balance sheets and hike rates to deal with inflation, there is going to be pain in the stock market; but that he, as a president concerned about work, not wealth, is going to keep doing what he can to preserve record job creation, and build an economy that supports middle class wages.

Ed, what do you think? Could telling the truth, in plain language, ever work in politics? And if you were going to advise Biden on a fireside chat, what would you have him say?

  • In the FT, I was fascinated by this piece by our architecture critic, Edwin Heathcote, about the newest, skinniest skyscraper on W 57th Street. Super tall buildings tend to herald market tops, so investors and design lovers alike might enjoy this piece.

  • I think Tish Harrison Warren, an Anglican priest, is quite right that nature is the antidote to loneliness.

  • I’m glad the New York Times’ David Leonhardt called out some rare and under-covered good news about how K-12 test scores in the US are actually getting better. Perhaps we have been flagellating ourselves unnecessarily about not keeping up with Finns and South Koreans.

Edward Luce responds

Rana, it was a wonderful festival in spite of the fact that our colleagues from London seem to have imported the weather. I was particularly struck by what CIA Director William Burns said about Putin, the spate of recent intelligence leaks around targeting in Ukraine (not to be confused with the administration’s declassified “pre-emptive intelligence”) and the difficulty of recruiting human assets in an age of ubiquitous surveillance, particularly in China. Swampians can read the transcript here. It is pretty remarkable to have America’s spy chief speaking with a mix of such candour and judicious restraint in the midst of an escalating proxy war. I reminded Burns that the last time I saw him was at the Washington premiere of Daniel Craig’s final Bond movie last October. Our conversation was far more engaging than anything that tired movie franchise has to offer.

As regards your question, Rana, I don’t rate Biden too highly as a fireside chat president. He is good on the stump and comes across as genuine and warm. But public speaking is not his strong point. Perhaps his most important address — on the first anniversary of the January 6 attempted putsch — sadly had no impact on public opinion. In my view Biden’s real strength at a time like this is his temperament, which is an underrated quality in a president.

I should stress that having the calm and experienced Burns at the CIA ought to be a global source of reassurance at a time when weaker characters and histrionic minds would be tempted to take things to the brink. Sometimes a president can get more done by not speaking. As the former British prime minister, Clement Attlee, once said to a colleague: “A period of silence on your part would be most welcome.”

Your feedback

And now a word from our Swampians . . .

In response to: ‘America is learning that history also goes backwards’:
“Ms Foroohar writes that she ‘can’t help but wonder if we aren’t headed towards some sort of multipolar union, made up not just of blue and red, but of entire regions with different cultures,’ and one must respond: quite so. Multipolarity, regional variation, and cultural diversity have characterised the American condition for the past four centuries, which is exactly why the Founders designed a system of government to accommodate those ineradicable qualities.” — Joshua Treviño, Austin, Texas

Your feedback

We’d love to hear from you. You can email the team on swampnotes@ft.com, contact Ed on edward.luce@ft.com and Rana on rana.foroohar@ft.com, and follow them on Twitter at @RanaForoohar and @EdwardGLuce. We may feature an excerpt of your response in the next newsletter

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