The 2024 election could be decided by the biggest rise in inflation in 40 years. In Thursday’s debate, President Joe Biden and former President Donald Trump both tried to get ahead on the issue.
“He didn’t do a good job.” He did not do a good job. And our country is dying because of inflation. “It is killing us all,” Trump said.
For his part, Biden said that when he took office, there was “no inflation.” He also said that Trump’s policies about the pandemic made prices go through the roof.
Inflation had been very low before the pandemic. From the end of the recession in 2007–2009 to 2019, prices went up an average of 1.7% a year.
During President Barack Obama’s second term, from January 2013 to January 2017, prices went up 5.4% overall.
The CPI showed that inflation rose by a total of 7.3% during Trump’s four years in office.
Inflation has gone up by a total of 19.4% during Biden’s three and a half years in office, with an 8% annual rise in 2022.
What’s the cause of really high prices? A lot of things are used by economists.
- Massive government spending, first by Trump and then by Biden, to cope with the economic fallout from the pandemic.
- The Federal Reserve’s March 2020 decision to slash a key short-term interest rate to zero and to buy trillions of dollars of Treasurys and mortgage-backed securities. These moves drove down interest rates and poured money into the economy. The Fed then kept rates too low for too long, critics say.
- Stimulus policies carried out by other countries to shore up their own economies.
- Huge bottlenecks in the global trading system that limited the flow of key supplies during the pandemic. Most notably, a shortage of computer chips hobbled the production of new cars and drove the price of cars and trucks to record highs.
To what extent do you think Trump and Biden are to blame for how much the government spends?
Because there are so many factors, economists say it’s impossible to know for sure. They also say that the economy could have been hurt a lot more if there hadn’t been any stimulus at all, which could have cost more in the long run.
Biden’s most important choice was the $1.9-trillion stimulus package he signed into law in March 2021. It included checks for $1,400 for most Americans. Two months after he became president, the bill was passed.
The plan was put in place even though the economy was already getting better quickly.
Some economists say it made the problems with global supply chains worse and made inflation go out of control. People all over the world had a lot of extra cash, but stores couldn’t give them all the goods and services they wanted.
In a famous opinion piece published in the Washington Post in February 2021, a month before the Biden plan was passed, Lawrence Summers said that the new U.S. stimulus “could set off inflationary pressures of a kind we have not seen in a generation.” Summers had been Treasury secretary under President Bill Clinton and an economic adviser to President Barack Obama.
As it turned out, inflation rose from 1.4% at the beginning of Biden’s presidency to as high as 9.1% in the middle of 2022.
Consumer price inflation has slowed to 3.3% since then, but it’s still almost twice as high as it was before the pandemic.
