President Joe Biden is preparing to face a brutal reelection battle with a terrible 38 % approval rating on the economy. Yet the White House and much of the internet blame the electors for failing to understand how great they’ve had it since 2021, with experts and cable TV visitors trying to solve the puzzle of how voters could possibly be so displeased with soaring prices, spiraling interest rates, large budget deficits, and sluggish wages. Binden properly reminds electors that he inherited a challenging business. However, his stringent spending and regulations caused inflation, interest rates, and national debt to rise even further.
The economic tone of this administration was set in its first 50 days with the enactment of the$ 1.9 trillion American Rescue Plan. Instead, voters who were still hoping a Biden White House would be reasonable, prudent, republican, deficit-focused, or even willing to listen to economists witnessed the emergence of a very political, yet largely intellectually liberal administration.
( BRENDAN SMIALOWSKI/AFP via Getty Images )
The new administration began crafting the American Rescue Plan before the ink had yet dried on a$ 900 billion trigger law signed by former President Donald Trump months earlier. The Congressional Budget Office predicted that the 2021 economy’s performance would be just$ 420 billion quick of its$ 22 trillion power as a result of this national saving that was already beginning to recover and resume from the crisis. The overly sweetened White House, however, shot a$ 1.9 trillion American Rescue Plan bazooka at this$ 420 billion production space. This inflamed package of bailouts, giveaways, and bottled- up Democrat wish lists included$ 350 billion to bail out state budget deficits that did not actually exist, a sluggish union pension bailout, and a decade’s worth of extra national school funding. The White House then increased public support by offering child tax credits, bonuses for unemployment insurance, and yet another round of taxpayer rebates.
Economists from all parties, including well-known Democrats Larry Summers and Jason Furman, expressed concern that the American Rescue Plan was a massive overreach that would lead to inflation. Furman continued,” I do n’t know any economist that was suggesting something the size of what was done.” Unfortunately, the White House ignored the economists. Democrats had created a ( false ) narrative that claimed the White House was committed to stop making that “mistake” and that the slow recovery from the previous Great Recession had been caused by insufficient federal funding.
However, raw politics took precedence over even these economic policy debates. Democrats refused to negotiate or compromise even one inch with Republicans because they treated this Christmas tree bill as their reward for sweeping the 2020 election and their turn to match the GOP tax cuts with their own budget buster — although Republicans at least spread the cost of the 2017 tax cuts over a decade, while most of the American Rescue Plan’s exorbitant cost would be packed into a single year.
The American Rescue Plan, the most expensive spending bill in decades, was signed into law on the 50th day of his presidency. As anticipated, the majority of this spending was completely unnecessary, and agencies and governors had no idea how to use it, and inflation reached a high of 9.1 % as forecast.
This persistent inflation has become the albatross weighing down Biden’s economic agenda. The president’s supporters point out to be true that a small amount of inflation was inevitable as a result of earlier pandemic spending that raised demand in an economy where supply was constrained by business shutdowns and supply chain breakdowns, simply could n’t keep up. But precisely because of this, economists warned that adding another$ 1.9 trillion in federal spending that the economy could not absorb would be considered economic malpractice. According to the Federal Reserve Bank of San Francisco, the president’s actions added 3 percentage points to the inflation rate.
A full-year$ 1.5 trillion federal funding bill was passed by the Senate and House to prevent a potential government shutdown while also funding aid for Ukraine in response to Russia’s March 2022 war. ( Susan Walsh/AP )
Even as inflation soared to 1970s rates, the Biden administration refused to take responsibility. The White House initially dismissed inflation as” transitory,” before using it as a rip-off for a video in which it claimed that” the cost of a Fourth of July cookout in 2021 is down$ 0.16 from last year.” The White House switched to scapegoating when inflation became too persistent to be dismissed. It blamed COVID- 19 and then “big meat” and then termed it” Putin’s price hike”. Even a Russia-Ukraine war, which did n’t start until 2022, was blamed on inflation for the inflation of 2021 by Biden. He claimed that” Build Back Better” spending trillions would somehow lower inflation. Finally, over the objections of the White House’s own economists, Biden settled on blaming corporate greed for inflation. The president never explained how such behavior suddenly became inflationary beginning in 2021, despite the fact that corporations have always been profit-maximizing. Prices increased by 20 %, costing families more than$ 10,000 while the White House cycled through various scapegoats.
In other words, the White House treated inflation as a communications challenge to message with talking points rather than an economic problem to solve with disinflationary policies. Biden continued to sacrifice inflation reduction at the altar of higher liberal objectives even after declaring that” I have made tackling inflation my top economic priority.” He increased inflationary spending by trillions. He attempted a$ 400 billion student loan bailout that was mercifully shot down by the Supreme Court. Unions were given Davis-Bacon prevailing wage mandates,” Buy American” rules, and inflationary tariffs. Regulations were tightened to raise the cost of economic development. Even a semiconductor bill that was supposed to reduce production costs instead hit producers with expensive child care and wage mandates that raised costs and prices. Even congressional Democrats had seen enough and had dramatically reduced the amount of money needed by Biden to release a$ 2.3 trillion Build Back Better proposal.
Sadly, the harm has been caused. Once inflation begins, it is extremely difficult to stop because businesses continue to raise prices and wages in anticipation of inflation continuing. Since Biden took office, even rising worker compensation has fallen behind. The hardest hit are those with fixed incomes.
The harder the president pushes the inflationary gas pedal with spending and regulations, the harder the Fed must slam the brakes with higher interest rates. The result is a mortgage rate increase above 7 % while home prices are rising at the same rate. Since Biden took office, the monthly mortgage on a newly purchased median-priced home has doubled, from$ 1, 109 to$ 2, 235. And like the proverbial demand for “more cowbell“, the president’s solution to inflation has been even more inflation, responding to these soaring house prices by proposing a$ 10, 000 tax credit for homebuyers that would only push up demand and housing prices even further.
In 2024, America’s stubborn inflation rate will be close to the top of Western developed nations. Additionally, as prices rise, the public’s mortgage, auto, and credit card debts, which briefly decreased as a result of large pandemic stimulus payments, are once again rising.
Not all economic news is bad. The S&, P 500 has increased by 43 % in the president’s three and a half years in office following a slow start. Less wealthy people have seen greater wage gains than wealthier people. The economy, while sluggish, has managed to avoid falling back into recession. Below 4 % unemployment has returned, which is in line with the impressive pre-pandemic levels.
Unsurprisingly, the White House has wildly exaggerated its influence on this positive news. The president claims to have personally created 13 million jobs since he took office and describes himself as the most accomplished job creator in history. This boasting not only ignores the fact that the private economy, not politicians, produces the majority of jobs, but it also ignores that the majority of recent job growth was largely attributable to the economy’s resumption following the pandemic. Opening the economy, reopening it, and then claiming credit for people’s employment is equivalent to turning the lights off, turning it back on, and then making a claim that they invented electricity.
Moreover, the quickly falling unemployment rate, while impressive, was also driven by the inflationary overheating of the economy. Without recognizing the painful inflation that those same policies brought, one cannot take credit for the faster job growth.
And while the rate of inflation has been horrifying, Biden’s most significant economic legacy may be his historic debt and spending spree. Trump had already signed legislation that cumulatively added a modern record of$ 7.8 trillion to 10- year deficits, only half of which was pandemic- related. Biden’s first 20 months, which he allegedly inspired by his predecessor, saw him sign, or mandate,$ 4.8 trillion in new 10-year costs, including the aforementioned American Rescue Plan and massive student loan bailouts.
When lawmakers and voters screamed “enough,” the spending spree was finally put an end to! First, the backlash to surging inflation led even Democratic lawmakers to kill the president’s$ 2.3 trillion Build Back Better proposal. Then, a Republican House was elected to remove the president’s credit card.
Biden absurdly claims to have reduced budget deficits despite all this spending and debt. After temporary pandemic spending spiked the budget deficit from$ 1 trillion in 2019 to$ 3 trillion in 2020 and 2021, the president points to the scheduled expiration of that spending in 2022 as a historic spending cut. In essence, the president dramatically increased spending in 2021 with the American Rescue Plan before referring to the president’s historic spending cut following the end of his own saga as a spending cut. Even the fact-checkers at the Washington Post who had a rare” Bottomless Pinocchio” rating criticized this gaslighting.
The president’s true fiscal record is more dire. Since Biden took office, the CBO projected budget deficit for the 2021-2020 period has increased by$ 5 trillion. The budget deficit doubled from$ 1 trillion to$ 2 trillion last year, excluding the canceled student loan bailout, making it the largest deficit increase ever for a growing economy in peacetime. At 7.5 % of gross domestic product, last year saw the largest budget deficit in American history outside of temporary emergencies such as wars and recessions. In 2021, average annual costs increased from$ 352 billion to nearly$ 1 trillion, and they are expected to reach$ 2 trillion within the next ten years.
Biden has continued to push this borrowing spree while also standing steadfastly against deficit reduction efforts. Even as projected Social Security and Medicare shortfalls leap from$ 650 billion this year to$ 2.2 trillion a decade from now, driving nearly all of the projected escalating budget deficits, Biden pledges to block all serious reforms to rein in these costs or even avert Social Security’s scheduled trust fund insolvency within a decade— unfortunately, Trump shares his bipartisan position. In contrast to the$ 5 trillion in new taxes that Obama’s budget proposes, nearly all of these revenues would be reinvested in new policies rather than deficit reduction, making deficit reduction even more challenging because it must begin at a much higher tax level.
WASHINGTON EXAMINER CLICK HERE TO READ MORE.
Biden also tries to have it all ways on the extension of the expiring 2017 tax cuts. He also contradictorily promises not to allow any taxes to rise above current levels for the bottom 95 % of earners while also stating that Trump’s” tax cut is going to expire” and even assumes that his budget will include all of these tax increases.
These rising prices, budget deficits, higher interest rates, and special interest giveaways cannot be attributed to voters. Overreaching on the American Rescue Plan and then relentlessly pursuing inflationary spending, regulation, and trade restrictions may cost Biden reelection in the same manner that inflation and overall incompetence doomed the earlier presidency of Jimmy Carter. Voters refused to reelect Carter, and such inflation and interest rates spooked a generation and sparked four decades of Fed inflation hawkishness. If Biden learns anything from Carter’s electoral experience, Biden’s subpar economic management should be a useful lesson for future political leaders.
Brian Riedl is a senior fellow at the Manhattan Institute. Follow him on Twitter at @Brian_Riedl.
