Americans, particularly working- and middle-class Americans, are poorer today than they were during the Trump administration...
President Biden is on a “Bidenomics” tour, trumpeting what he claims are his administration’s economic gains. His effort comes as no surprise. In the RealClearPolitics average of the polls, only about 38 percent of Americans approve of Biden’s job on the economy. To date, the Biden administration’s efforts to convince Americans otherwise have fallen way short of the mark. The problems lie not with Biden’s rhetoric but rather with his policies — and economic reality.
Case in point: In an effort to avoid responsibility for a still-surging inflation rate while claiming credit for slowing it, Biden’s economic team recently posted a video boldly stating, “Here Are the Facts.”
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The first of these purported facts is, “Under the Biden Harris Administration Inflation Has Fallen.” Unfortunately, that’s just not true.
The annual inflation rate when Biden took office was 1.4 percent. In May, it was 4 percent, or nearly three times the rate he inherited and still double the Federal Reserve’s 2 percent target rate.
Here’s an actual fact: “Under the Biden Harris Administration Inflation Has Risen.”
Of course, what the Biden team is attempting to take credit for is the decline in the inflation rate from its 9.1 percent peak in June of 2022.
The Biden video goes on to claim that “inflation is less than half what it was last summer.”
That claim is misleading for two reasons.
First, inflation continues to increase, inflicting greater and greater pain on consumers. Only the rate at which inflation is increasing has slowed. Keep in mind that inflation is cumulative; much like compound interest, it just keeps adding up. After a large increase in the prior year, it is not particularly impressive that the current year increase will be lower, but that lower number comes on top of — or in addition to — the prior year’s number. For example, the 4 percent increase this May was on top of last May’s 8.3 percent increase for a two-year increase of nearly 13 percent. That’s nothing to boast about.
In fact, since Biden took office, inflation has increased by about 16 percent. If inflation slowed to zero through the rest of Biden’s presidency, that would still be the largest increase for any four-year presidential term since the 1980s — a fact that somehow didn’t make it into the Biden video.
Second, the inflation rate slowed because the Federal Reserve dramatically increased interest rates, not because of any Biden economic policies. In reality, rather than slowing the current inflationary surge, Bidenomics was a primary cause. This surge began the very month Democrats passed Biden’s ironically named $1.9 trillion American Rescue Plan. Prior to the bill’s passage, Larry Summers, the secretary of the Treasury under President Clinton, warned that it could “set off inflationary pressures of a kind we have not seen in a generation.”
And it did.
That inflationary pressure compelled the Federal Reserve to increase interest rates at a historic pace over the past 15 months — from near zero to a 5 percent–5.25 percent range today. The consequences have been severe, leading to three of the four largest bank failures in our nation’s history, undermining the banking sector’s integrity, threatening our financial stability, and requiring federal intervention. Buying a home or a car, paying down credit cards, or getting a small-business loan are all more difficult, which puts additional economic pressure on Americans as interest rates rise.
For that series of events, the Biden–Harris administration actually does deserve credit.
And we aren’t out of the woods. As Fed chairman Jerome Powell stated recently in testimony before Congress, “Inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go.” Powell also expressed frustration with inflation’s persistence, despite the Fed having significantly increased interest rates: “Inflation has consistently surprised us, and essentially all other forecasters, by being more persistent than expected and I think we’ve come to expect . . . it to be more persistent.” As a result, the Fed is expected to raise rates two more times this year.
Slowing the economy and bringing inflation down would be easier if the Biden administration and the Fed did not appear to be working at cross purposes. Powell regularly emphasizes the need to slow the economy to bring inflation down. Biden, on the other hand, continues to tout how his big-government spending policies — Bidenomics — are growing the economy, in effect conceding that his massive government spending policies are what’s driving inflation — but clearly not what’s causing it to slow.
The Biden video’s final claim is that, “Wages are up, accounting for inflation, that’s real breathing room.”
On its face, this claim is also not true. When Biden took office in January of 2021, real average hourly earnings — that is average hourly earnings adjusted for inflation — were $11.39. As of May 2023, that number had declined to $11.03. That simply doesn’t feel like breathing room for most Americans.
Inflation is a regressive tax that hurts families more the less money they have. The fact is that Americans, particularly working- and middle-class Americans, are poorer today than they were during the Trump administration, and Biden’s approval rating on the economy reflects that reality. Bidenomics — more accurately “Spin-enomics” — is an effort to convince them otherwise, asking them to ignore their eyes and wallets. It’s a tough sell.
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ANDY PUZDER is the former CEO of CKE Restaurants, the executive chairman of 2ndVote Advisers, Inc., and a senior visiting fellow at the Heritage Foundation.
