Feb 14, 2024
Stephen Schwarzman, CEO of the Blackstone Group, has serious concerns about whether the U.S. economy can handle another term under President Joe Biden.
When asked about how he thinks Biden winning re-election in November might impact the economy, Schwarzman didn’t have an optimistic view.
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“We’ve now got $2 trillion deficits with no end in sight. We’ve got our debt-to-GDP [ratio] going up. We’ve got open borders with 8 million people coming over,” the billionaire businessman — and Republican mega donor — told Bloomberg.
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“I don’t know that the country, frankly, is prepared for four more years of that.”
The country, however, may not need to prepare for Schwarzman’s apparent worst-case scenario. While the election is still months away, early polls suggest former President Donald Trump has a sizeable 11-point lead over Biden — specifically when it comes to the matter of handling the economy, according to the Financial Times. Around 42% of respondents in the Financial Times poll believe Trump would be the best choice to lead for the economy going forward, compared to just 31% who chose Biden. The remaining 27% were undecided or pulling for another candidate.
Here’s what’s got Schwarzman alarmed and how it could impact you — whichever candidate you’re rooting for.
Problems building for years
On the surface, things don’t look good. U.S. national debt soared to $34.2 trillion by Feb. 14, according to the real-time U.S. Debt Clock.
That total is more than the combined GDP of the top five global economies after the U.S. — China ($17.9 trillion), Japan ($4.2 trillion), Germany ($4.0 trillion), India ($3.4 trillion) and the United Kingdom ($3.0 trillion) — according to World Bank data.
As of Jan. 31, the U.S. federal budget deficit — the difference between government spending and revenue — was at $1.75 trillion. And the U.S. debt-to-GDP ratio — the ratio between a country's government debt and its GDP — is currently at 123%, according to the World Economics GDP Database.
“It would be good if we could get our financial house in order,” Schwarzman stated — but he doesn’t think the U.S. is headed for a “big financial problem.”
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“Usually financial crises come when you don’t expect them and they come quickly,” the 76-year-old private equity boss pointed out.
The current problems in the U.S. have been building for years and they seem to be on a slow and steady path to recovery — unless, of course, another macro event throws things off course.
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‘Optimistic for 2024’
Despite seemingly dissing so-called Bidenomics and raising alarm bells over what could happen to the U.S. economy, Schwarzman also claimed to be “optimistic” for 2024.
He told Bloomberg the economy has slowed — “that’s normal with high interest rates” — but he expects rates to come down in the second half of the year.
“We will get the [rate] cuts,” he said, with absolute certainty.
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Why is Schwarzman so confident? Because Blackstone — the world’s largest alternative asset manager, with $1 trillion in assets under management — is currently measuring U.S. inflation at around 2%, which happens to be the Fed’s inflation target.
This is far better than the latest Bureau of Labor Statistics inflation data, for January, which came in at 3.1% — with the shelter index remaining an outlier at 6%.
“They’re looking at 6% in rents and residential real estate [inflation] and we’re the largest owner of residential real estate and we think it’s 0-1%,” said Schwarzman.
“Let’s bet on us [Blackstone] on this one because we’re the people actually doing it. And if you correct the index for that difference between what’s really going on [in residential real estate] and [what] they’re saying is 6.2%, you get around 2%.”
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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.
