How Biden’s Spending Explosion Caused the Inflation Crisis
Now that the election is safely in the past, we are finally getting some clarity about the economically damaging inflation that crippled Joe Biden’s presidency and swept the legs out from Kamala Harris’s attempt to become the 47th president.
The Wall Street Journal on Sunday night published a piece by Nick Timiraos, the paper’s chief economics correspondent and the nation’s leading Fed interpreter. Timiraos’s status as the Fed’s main conduit for indirectly communicating with investors and the public and as the Journal‘s top economic news guy is important to understanding the impact of this story.
The title of the article is “How Democrats Blew It on Inflation.“ The subheading goes on to explain that “[i]n avoiding the missteps that followed the 2008-09 financial crisis, officials made new mistakes that led to political defeat.” In other words, the article is laying inflation and its political consequences—the Republican sweep in the recent elections—at the feet of Biden and the Democratic Party.
The story begins exactly where it should: the decision to immediately push for that enormous $1.9 trillion spending bill misleadingly named The American Rescue Plan. As we have frequently argued in the Breitbart Business Digest, this was the crucial step for pushing the U.S. economy from what would likely have been a mild inflation resulting from pandemic supply chain dislocations into the full-fledged crisis we experienced.
We Saw It Coming in 2021
We’ve been covering this for years. As early as September of 2022, we wrote that “the massive and unnecessary fiscal expansion of Biden’s first year in office pumped up demand so much that it set the economy on track for the worst inflation in four decades.” As early as the spring of 2021, we were warning that inflation was rising too rapidly and was likely to weigh on the financial health of lower-income Americans.
“The first two months of the presidency of Joe Biden have not been a particularly auspicious period in which to be black, poor, or working class in America,” we explained on April 9, 2021.
Here’s how we described the sudden development of inflation:
In Ernest Hemingway’s 1926 novel The Sun Also Rises, one character is asked how he went bankrupt. “Two ways,” the man replies, “Gradually and then suddenly.” Something of this could be seen in Friday’s Producer Price Index figures, which showed prices moving up more than twice as much as expected on a month-to-month basis in March. Compared with February, prices moved up by one percent, speeding past the four-tenths of a percentage point expected.
The numbers are even more startling on an annual basis. Annual inflation kicked up to 4.2 percent, the highest figure since September 2011. Of course, the crazy year of 2020 scrambles the signals a bit. Last year, we were headed into mandatory lockdowns in March, with businesses shuttered and people advised that touching a cereal box might contaminate them with the deadly China plague. Prices dropped in February and March. As a result, the year-over-year gains exaggerate how much inflation is really occurring.
But economists were well aware of this so-called “base effect” going into the month, and still they underestimated inflationary pressure. Fed chair Jerome Powell has assured us that any rise in inflation is likely to be “transitory,” but if economists miss the size of the price gains, how confident can we be that they’ll correctly forecast the duration of rising prices?
Price gains were particularly concentrated in energy and food. Gasoline prices rose 8.8 percent in March and are up over 50 percent compared with a year ago, when prices were depressed by people sheltering at home. Food prices rose half a percentage point compared with February and are up 5.1 percent compared with a year ago.
Food and transportation make up a far larger share of household expenses for families at the bottom end of the income ladder than those at the top. So the inflation we are experiencing is weighing particularly hard on the poor and working class. Biden, who ran on raising taxes only on the wealthy, is presiding over a regressive stealth tax hike on the bottom two quintiles of the income brackets.
In April 2021, Breitbart’s own Jim Pinkerton even correctly predicted that the rise of inflation would bring political ruin down upon the Democrats:
Joe Biden was first elected to public office in 1970, the same year that Jimmy Carter was elected governor of Georgia.Two years later in 1972, Biden was elected as a senator from Delaware, and four years after that in 1976, Carter was elected to the presidency with Biden as a worker bee on his behalf.
So, during the late 1970s, Biden served in the Senate while Carter was in the White House. Then in 1980, when Carter was running for re-election, Biden appeared at the Democratic National Convention praising Carter on national television.
In other words, Biden should remember well what life was like during the Carter administration.And he should also remember that Carter went down in a landslide defeat in 1980, losing 41 of 50 states—including Biden’s Delaware—to Ronald Reagan.
President Jimmy Carter listens to Sen. Joe Biden (D-DE) as they wait to speak at fundraising reception in Wilmington, Delaware on February 20, 1978. (AP Photo/Barry Thumma)
[…]
In other words, if there’s a new bout of inflation, the wealthy will likely be fine—and they’ll still be wealthy, no matter what. In reality, the biggest losers are likely to be those of humbler means, including those on fixed-income pensions and those who keep their funds in a checking account—or under a mattress.
It seems unnecessary to add that there are more voters with middle and low incomes than with high incomes. Which is, to say, by inflating the economy, Biden could be deflating his political standing.
So now we can wonder: If we again suffer from inflation as we had in the 1970s, might the Democrats today suffer another political backlash—as they did in 1980? Surely Biden remembers Reagan giving Carter the boot? Right?
There’s no way to know. And yet we do know, because wise old Santayana told us, Those who cannot remember the past are condemned to repeat it.
Of course, the spending explosion was not the original sin of the Biden administration. It was an almost necessary follow-up to the mendacity of the Biden campaign, which falsely claimed that the economy was in ruins due to alleged mismanagement of the pandemic by the Trump administration. In truth, no country in the world handled the economic fallout from the pandemic better and almost never in history has an economy bounced back as well as it did under Trump.
Vice President Kamala Harris delivers remarks in Seattle, WA, on the one-year anniversary of the Inflation Reduction Act on August 15, 2023. (Official White House Photo by Polly Irungu)
But having lied their way into the White House, the Biden administration needed to prevent Trump from getting credit for the recovery. Even those in the administration who may have actually believed the economy was in danger of failing in early 2021 were being blinded by their loathing of Trump and his advisors. So, the deceivers and the self-deceived united behind Biden’s reckless spending program.
Amazingly, some Democrats are already rushing to forget even the most recent episode, denying that Biden’s extraordinary spending had anything to do with inflation or that inflation had anything to do with the election results. We suspect, however, that more honest assessments—like the one Timiraos lays out in the Journal and the one we’ve been making for nearly four years—will become the prevailing wisdom.
