Does Biden deserve credit for falling inflation?
Brad Polumbo
The economy is finally starting to wake from its inflation nightmare. The latest inflation data for June show 3% year-over-year inflation, still a significant rate of price increases, but way down from 9.1% in June 2022.
President Joe Biden and his media allies are touting this as a massive success. But is this victory lap really deserved?
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It’s complicated, but the short answer is no.
For one, inflation is falling, yet it’s not at zero or the normal 1-2%, meaning prices are still going up at unusual rates and Americans are still getting poorer, just not by as much. And the bleeding slowing down does nothing to undo or ameliorate the wound inflicted upon American families’ finances. The average U.S. household has lost an astounding $6,000 thanks to inflation under Biden, and that’s not in any way healed or resolved simply because the rate at which prices are continuing to go up is falling.
What’s more, inflation is falling in part due to factors outside Biden’s control.
For example, the Federal Reserve printed trillions of new dollars out of thin air to “stimulate” the economy during the pandemic. This expansion of the money supply inevitably caused inflation because as more dollars chased the same amount of goods, prices predictably rose. The Fed has finally started to scale back over the last year, and the money supply has flatlined. That’s a big part of why inflation is easing up, but it’s not anything for which Biden can take credit.
“The decline in the money supply and expectations about continued decline in the money supply are probably the most significant factors which explain the fact that prices are increasing more slowly now than the past year,” Foundation for Economic Education economist Peter Jacobsen told me.
As for whether Biden deserves credit, Jacobsen says, “Insofar as he has given the Federal Reserve space to allow interest rates to return to normal, that’s a good thing. But the inflation itself was caused by the unprecedented 40% increase in the … money supply during the height of COVID. I didn’t hear or see anything that indicated Joe Biden opposed this policy either before or after his election, so it’s hard to give him credit now that it’s ended.”
Jacobsen did note, correctly, that this inflation-causing expansionist monetary policy first began under the Trump administration.
But government spending played a large role in the inflation wave as well, as much of the money to pay for the record levels of pandemic spending was essentially printed out of thin air through “monetization” of the debt. And on this count, Biden made inflation much worse.
Biden’s ineffective and fraud-rife multitrillion-dollar “stimulus” legislation, the American Rescue Plan, further poured fuel on the inflation fire in 2021 and 2022. But now that pandemic-era spending has expired and no new stimulus bills have been passed, government spending levels are declining significantly, so it’s not surprising that inflationary pressures are easing, too. Yet this decline in spending happened against Biden’s wishes; it has occurred in part because the Republican-controlled House wouldn’t pass the additional spending Biden wanted.
“I’m thrilled that inflation is starting to come down,” Marc Goldwein of the nonpartisan Committee for a Responsible Federal Budget told me. “But it’s still too high, and the fall is mostly in spite rather than because of fiscal policy. The president does deserve a bit of the credit for some of the improvements to supply chains and the use of the petroleum reserve — but deficit-boosting bills he signed are responsible for a good part of the initial spike.”
Goldwein agreed that Biden would’ve spent much more if he could have: “Had the president’s preferred policies gone into effect, fiscal policy would be adding more to inflation — at least in the near-term. That includes from student debt cancellation, which the court ruled against.”
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So the idea that Biden deserves credit for solving inflation is pretty bizarre.
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It requires ignoring the damage that was done and the fact that prices are still going up. It also requires ignoring the fact that Biden would’ve passed more inflationary policies if he could have, so the decline in the inflation rate is in part happening in spite of his wishes.
If you find yourself engaging in this kind of mental gymnastics to give Biden credit where it isn’t due, you might have drunk too much of the partisan Kool-Aid.
Brad Polumbo (@Brad_Polumbo) is an independent journalist and the co-founder of BASEDPolitics.