‘Bidenomics’ Are No Cause for Celebration
President Biden is proud of his economic record. “Our plan is working. And one of the things I’m proudest of is that it’s working everywhere,” he said recently.
Every president makes these kinds of claims, and all of them choose selective data to support them. But in this instance, you don’t have to look too far to realize that Mr. Biden is ignoring some essential facts.
First, inflation has been like an infestation of termites in our economy. Its erosion of the value of the dollar and the purchasing power of consumers has been tremendous. According to the federal government’s Consumer Price Index, “The purchasing power of the dollar declined about 7.4 percent between 2021 and 2022 because of inflation. Or stated another way, a dollar in 2022 could only buy 92.6 percent of what it could buy, on average, in 2021.” That’s just one year. In total, from January 2021 through May 2023, the aggregate inflation rate is about 17%.
It’s also noteworthy that a decline in the rate of inflation doesn’t mean that prices are falling or returning to their previous level. It simply means the loss of value is continuing but only at a slower pace.
One of the most obvious areas where inflation has taken a severe bite is gas prices. In January 2021, the national average price of a gallon of gas was $2.41. As of last week, gas was $3.57 per gallon nationwide. Adjusted for inflation, this is a real increase of 77 cents per gallon.
Of course, the cost of energy has a profoundly adverse effect on major U.S. industries and innumerable small- and mid-sized companies around the country. They pay for these increased costs by passing them on to consumers, of course, and also to those in other countries that want to purchase from America. This means our companies have a harder time selling their goods abroad.
Similarly, food prices went up 11% percent from 2021 to 2022. According to the Department of Agriculture, food prices increased nearly 7% between May 2022 and May 2023. While there is some overlap in these data, anyone who’s gone to the grocery store of late sees the price hikes right on the labels.
As to employment, the unemployment rate in June was 3.6% — not bad. However, this figure does not capture the whole picture. As of July 7, the underemployment rate, according to the U.S. Bureau of Labor Statistics, stands at 6.9%. This rate “considers anyone who has looked for a job within a year and desires to work as unemployed. It adds those workers who are part-time purely for economic reasons. Its wider and more realistic criteria are considered by many economists.” In other words, actual unemployment is nearly double what the popularly reported figure says it is.
In fairness to President Biden, not all the news is bad, and some of the bad news is not his fault. For example, as of December 2022, nearly 53 million chickens had died due to “the deadliest U.S. bird flu outbreak in history.” This disaster could hiked the price of poultry items at the grocery store, and it is no more Biden’s fault than Donald Trump’s.
The larger issues are these: Do the president’s self-vaunted economic policies deserve the praise he desires for them and are there things he has done that have impeded what otherwise could be more robust economic growth?
To the first question, the president has pumped trillions of dollars into the economy in the name of economic recovery post-COVID. As explained by Desmond Lachman of the American Enterprise Institute, in March 2021 Biden “chose to sign the $1.9 trillion American Rescue Plan. That came on top of the previous year’s $3 trillion bipartisan budget stimulus measures. As a result, the U.S. economy received by far its largest peacetime budget stimulus on record, amounting to more than a staggering 20% of the country’s gross domestic product. Not satisfied with this degree of public overspending, President Biden added the so-called Inflation Reduction Act to the pile last year.”
Simply put, printing money in order to artificially jack up the economy might provide a short-term burst of economic energy but it also means substantial increases in inflation. Printing money in the absence of non-inflationary productivity equals ongoing increases in prices of all kinds – and that’s called inflation.
Add to this the Federal Reserve’s desperate efforts to tamp down inflation through imposing higher and higher interest rates, and you don’t have a recipe for sustained, well-balanced economic growth. Instead, sluggishness and possible recession loom.
As to the second question, Mr. Biden continues to look to federal manipulation of private sector as the solution to economic malaise. He should try some other, more simple things: Lower taxes, less government, and fewer regulations. Yes, these things have been tried before, and liberals don’t like to hear them. However, they have a singular advantage: They work.
Predicting economic outcomes is sort of like projecting who will win the Super Bowl: The variables are simply too many for anyone to state conclusively what will happen. But just as the law of gravity is fixed, so are some basic economic laws. “Bidenomics” is violating a number of them. Were I advising the president, I’d discourage too much boasting.
Rob Schwarzwalder, Ph.D., is Senior Lecturer in Regent University's Honors College.