The one area where the Biden economy exceeded anybody’s wildest imagination has been in the rate of inflation.
The one area where the Biden economy exceeded anybody’s wildest imagination has been in the rate of inflation.
W ith each passing week, the Biden economy keeps setting records — just not in the way the administration, or anybody, would like. A month ago, inflation reached a 31-year high. November’s inflation passed that mark by hitting a 39-year record of 6.8 percent, and economists expect inflation for 2021 as a whole to top 7 percent when the next CPI reading is released in early January 2022. According to a recent poll, the American people rate the Biden administration’s economic performance as the worst for any first-term president in at least 44 years — since Jimmy Carter. Recognizing the danger signs of falling poll numbers, the Biden administration is now in the midst of a coordinated public-relations campaign to gaslight voters into ignoring rapidly rising prices and subpar job growth. Instead, the White House wants the public to believe that we are in a period of historic prosperity delivered by the administration’s retro-Keynesianism and its anti-supply-side counterrevolution of permanent deficit spending, job-killing mandates, and work disincentives. The administration is also receiving an assist from the media, with some proclaiming that “Biden’s Economic Performance Has Proved Unbeatable.”
But the facts tell the true story. It was policies implemented under the Trump administration that led to a dramatically faster and more robust recovery than anybody expected — both in the years following the passage of the 2017 Tax Cuts and Jobs Act, when the U.S. economy ended the malaise of the slowest recovery in modern memory by reaching record low rates of poverty and record high income gains, and in the second half of 2020 when the economy roared back from the depths of the Covid recession at a pace few anticipated. By contrast, the economy’s performance over the past year has generally disappointed relative to forecasts for GDP, payrolls, and unemployment. The one area where the Biden economy exceeded anybody’s wildest imagination has been in the rate of inflation.
The contrast in the numbers is striking. After the economy suffered historic job losses in April 2020, private-sector forecasts had the U.S. shedding another 7.5 million jobs in May. Instead, the quick passage and enactment of the CARES Act under the Trump administration, an act designed to stabilize both demand and supply, caused the U.S. economy to add 2.8 million jobs — beating expectations by over 10 million. This stark reversal was no fluke. The Paycheck Protection Program was specifically designed to mitigate layoffs, prevent a wave of small-business bankruptcies, and strengthen labor-market attachment to lay the foundation for a robust recovery. It was a 21st-century pro-worker supply-side remedy to a unique crisis.
The economy continued to exceed expectations throughout summer 2020 and beyond. After the historic contraction in the second quarter of 2020, the CBO in July 2020 projected payroll employment to increase by 2.1 million between the second and third quarters. Instead, the Trump recovery produced a payroll boom that more than tripled this forecast — creating 7.1 million jobs — as shown in figure 1. These policies put the U.S. economy on a more robust recovery trajectory for the rest of 2020 and beyond.
In recognition of this success, the CBO’s revised February 2021 forecast had payrolls following a significantly higher path for 2021. The Biden administration inherited this strong economy and, despite spending trillions of dollars through the American Rescue Plan, proceeded to watch jobs numbers come in below expectations. Data for the unemployment rate and GDP largely tell the same story, as can be seen in figures 2 and 3. The Trump policies set the unemployment rate and GDP on more robust recovery trajectories than the CBO anticipated back in July 2020, which Biden inherited and did nothing to measurably improve upon.
Biden’s plans for the future would only double down on this vision with supply-crimping tax hikes, mandates that would create inflationary pressures for energy and child care, and a permanent universal basic income–style welfare state that makes work optional, thereby undermining the productive capacity of the economy to meet demand without prices rising. Americans will not be duped by the White House’s public-relations campaign to cover up its devastating record of economic failure.While the economy under the Biden administration is mostly riding the coattails of the previous administration’s successes, it is surpassing expectations in one key metric: the pace of price increases. The U.S. economy is suffering from far higher inflation than the CBO or any other forecasters were projecting earlier in 2021, as figure 4 vividly shows. The contrasting policy visions tell the story. The Trump White House recognized the importance of the supply side of the economy — embracing the reality that a prosperous economy requires a society of producers, not just consumers. By contrast, the centerpiece of the Biden administration’s anti-supply-side counterrevolution has been a devastating social experiment of enacting universal basic income by stealth, first through needless extensions of generous unemployment benefits that incentivized people to remain jobless and then through an ersatz child tax credit stripped of work requirements that a recent University of Chicago study estimates will drive 1.5 million workers out of the labor force.
