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Bidenomics: Republicans pounce on economic slowdown

Yahoo Finance's Rick Newman details the political climate around declining GDP, inflation, recession concerns from Republican lawmakers, voter sentiments on policy pushes, and gas prices.

Video Transcript

BRAD SMITH: Welcome back to Yahoo Finance Live, everyone. Economic activity declined at an annual rate of 1.4% in the first quarter. And while economists were shocked to see a sharp contraction, Republicans saw it coming. Let's break this down in this week's "Bidenomics" with Rick Newman. Rick, what do we need to know?

RICK NEWMAN: Well, I look at the political ramifications of the economic developments of the week. And because we actually had a decline in GDP, which economists didn't expect, we're now hearing a lot of Republicans talk about the Biden recession. Kevin Brady mentioned this the other day. He basically said of course this is what you get when you have socialist policies, such as Biden has.

If you follow Republican fundraising emails, which I do, you're going to see a lot of this. We are not in a recession, and most economists do not think we're going to be in a recession. One quarter of a GDP decline does not equal a recession. And we know why that happened. It had a lot to do with the Delta-- excuse me, the Omicron variant of the COVID virus.

This quarter included the beginning of the Russian invasion of Ukraine. And growth is probably going to bounce back in the second and third quarter. But Biden has a problem, because Americans are very gloomy about the economy. And they are very happy to believe Republicans when they say we're in a recession and the biggest contributor to this is not any statistic about GDP, but, of course, it's inflation.

So I think Biden has a very hard sell on the economy for the next several months leading into the midterm elections. And Republicans, even though they're not right about being in a recession, they have some ammunition.

DAVE BRIGGS: Yeah, they're going to need a massive GDP number. They're going to need some real rallies in this market to not lose the House and the Senate. Rick, a new poll, fascinating, revealed-- regarding DeSantis versus Disney, a majority of US voters oppose politicians punishing firms over their political voices. Now, what really shocked me inside this poll is that it was Democrats far outweighed Republicans in terms of supporting businesses.

I feel like we've completely flip-flopped our political priorities. 68% of Democrats do not support politicians attacking businesses. Only 55% of Republicans do. What do you make of that?

RICK NEWMAN: That didn't surprise me. And this is basically about-- it's not about just government regulation of businesses anymore. It's about the government basically telling businesses what stand they should take on these social and cultural issues. This is all about the social and cultural warfare Republicans are trying to wage.

What Democrats are basically saying is, leave companies out of it. And what Republicans have been doing is taking this culture-- these cultural battles straight to any business that opposes them, which is what happened in Florida. Now, as a caveat to that survey, Dave, I think it's fair to point out that most people aren't paying close attention to who said what in what, honestly, are pretty stupid battles between politicians and CEOs.

I mean, most people who are going to go to Disney World this summer, they're not going to know where Disney stands on this child protection law in Florida. And I would bet that a lot of people in Florida don't even know. But among those who do know, you know, they're basically saying, we understand these political and cultural issues, but let's leave business alone.

RACHELLE AKUFFO: Well, it's interesting, because, I mean, when we're talking about things like spending, and we're seeing that consumers are still willing to spend even if they are being more discerning, perhaps, about which companies they choose to spend with-- but then you also have Dr. Anthony Fauci saying, look, we're out of the pandemic phase of COVID. How do you see those things sort of converging? As we are in a midterm election year and people don't seem to feel like they're doing better, but they're still willing to spend.

RICK NEWMAN: I think inflation at 8.5% is basically blocking out the sun when it comes to the economy. There's a lot that's going right in the economy. We still have an unemployment rate that's close to-- near record low. Wage growth is pretty good. Jobs are, obviously, still available.

People have saved a lot of money during COVID, which is helping a lot of families deal with higher inflation. But they just-- honestly, I think half of the problem here is gas prices. Gas prices, they turn American consumers into zombies when they get too high. I mean, this just has an outsized effect on consumer psyches when you see $4 dot something for a gallon of gas, or in California, $6 a gallon.

This just signals to people that something's wrong. The single best thing that could happen to Biden in 2022 is gas prices just get below that $4 handle. If we could get gas prices starting with a $3 instead of a $4, I think Americans would breathe a sigh of relief and it would be a big help for Biden. And that could happen.

But I think we've got to get through what is now a very worrisome phase in this Russia-Ukraine war and, you know, possible talk of a European boycott of Russian oil. We're still not out of the woods on this yet.

RACHELLE AKUFFO: Indeed. Well, big thanks to Rick Newman there for joining us and breaking all of that down. Thanks, Rick.