The Biden Economy: A Tale of Two Stories
As Joe Biden prepares to leave office, his economic legacy is a mixed bag. On one hand, the economy has made significant strides, with hiring proceeding at a solid clip, GDP on the rise, and consumers still spending at a strong pace. On the other hand, the burden of inflation has overshadowed these achievements, leaving a lasting impact on households, particularly those at the lower end of the income spectrum.
A Blemished Legacy
Despite inheriting an economy that was struggling to recover from the pandemic, Biden’s administration has been unable to shake off the perception that inflation has gotten out of control. Even with the pace of inflation slowing down, consumers, investors, and business owners continue to cite it as their top concern. According to Mark Zandi, chief economist at Moody’s Analytics, “Biden inherited an economy that was flat on its back because of the pandemic, and he’s bequeathing an economy that’s flying high… Having said that, there are blemishes in the minds of many Americans… They feel ripped off.”
The Inflation Conundrum
A closer look at the data reveals that the cumulative inflation rate during Biden’s term has been 21%, compared to 8% during Trump’s first term. This has led to a significant disparity between wages and prices, pushing consumer confidence 6% lower under Biden than when he took office. Even with a pickup in wages in 2024, the 19% increase in average hourly earnings under Biden is still below the inflation rate.
The Wealth Gap
While household net worth has surged, and consumers have continued spending, the benefits of this growth have been skewed towards those with the resources to invest in stocks. The share of total net worth held by the richest 1% stands at 30.8%, its highest in about three years. Similarly, 1% of the population controls nearly 50% of all stock market-related wealth, a number that has gradually increased over the past few years.
The Policy Response
Economists and policymakers agree that supply-demand imbalances, trillions in fiscal and monetary stimulus, and a slow-footed monetary response have all contributed to the inflation problem. Biden’s administration has been criticized for its fiscal policies, including the $1.9 trillion American Rescue Plan and the 2022 Inflation Reduction Act, which some argue have added to the inflation burden.
The Labor Market
Despite the challenges, the labor market has been strong, with millions of jobs created as employers sought to meet their own supply-demand mismatch. The unemployment rate has been slashed by more than 2 percentage points, and looking stable lately despite a blip higher in mid-2024. However, the price of this growth has come in the form of a bloated federal budget, with a deficit that hit $1.8 trillion in 2024 and is tracking well north of that in fiscal 2025.
The Uncertain Future
As Biden leaves office, the economy is left with many unanswered questions. Will the Fed continue to lower interest rates, or will it hold steady? How will the government address the growing debt and deficit? And what will be the lasting impact of Biden’s economic policies on future generations? One thing is certain: the economy is still not out of the woods, and the road ahead will be fraught with challenges.
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