For Joe Biden’s economy, what’s up should be down and what’s down should be up. Inflation, fueled by his own over-spending, has proven resiliently high, while real GDP has stubbornly under-performed, despite economic growth being his justification for over-spending. If inflation and growth could just be reversed, Biden would have the gang-buster economy he proclaims to have, instead of the lackluster one he has inflicted on America.
Inflation has been a hallmark of this administration. Almost immediately after Biden took office, inflation (both overall and core consumer price index, or CPI) started rapidly increasing, going from below 2 percent in January and February to overall CPI breaking 5 percent and the core rate hitting 4.5 percent in June. Neither stopped. A year later, June overall CPI hit 9.1 percent, and core hit almost 6 percent (5.9 percent).
In March 2022, the Fed responded with 11 interest rate hikes, taking rates from a range of 0 to 0.25 percent to about 5.4 percent, where they still stand. Yet despite this dramatic series of hikes, inflation refuses to yield. According to the Bureau of Labor Statistics, in August the overall CPI was up 3.7 percent from a year ago. That is up from a 3.2 percent increase in July; the core CPI was up 4.3 percent year-over-year.
What has also been high has been the Biden administration’s spending. According to the Congressional Budget Office, after leaping almost 50 percent during 2020’s COVID cataclysm, spending increased still more in Biden’s first year. Even when it dropped in 2022, it fell less than 10 percent, leaving federal spending a mere 4 percent off its 2020 leap and a whopping 41 percent over 2019’s pre-COVID level.
For Biden, what’s up needs to be down. In the case of inflation, however, it refuses to drop; in the case of spending, the Biden administration refuses to let it fall.
What has not been a hallmark of the Biden administration is strong economic growth. After the expected rebound from COVID’s 2020 economic collapse, the economy has been lackluster at best. Real GDP growth in 2022 was just 2.1 percent. Thus far for 2023, it was 2.0 percent in Q1 and 2.1 percent in Q2. The Federal Reserve’s latest full-year 2023 economic growth forecast is 2.1 percent and, for 2024, just 1.5 percent.
For Biden, what’s down needs to be up. Yet in the case of the economy, it’s not — despite Biden’s massive federal spending, touted as helping the economy, that essentially kept COVID.
The Biden administration has been teaching America a painful economic lesson for the better part of three years: Rhetoric is not reality when it comes to the economy. Despite the Left’s promises, government does not create wealth; government taxes it, government borrows it, and — in the most extreme cases — government destroys it, but government does not create it.
This administration and the Left have instead created a paradox: Why is Biden not getting credit for the economy? The answer is because the orthodox has prevailed: Biden’s excessive inflation has outstripped his tepid growth — with the result that he is getting the credit.
Biden has overspent, and his economy has underperformed. And now this underperforming economy must take strong medicine to cure the inflation that Biden’s overspending helped fuel. Despite 11 Fed rate hikes over two years, inflation remains roughly twice its acceptable rate. And there has been no sign of when the Fed will be able to lower interest rates — the Fed is not projecting inflation to reach its target 2 percent rate until 2026.
If Biden’s inflation numbers were his GDP numbers, and if Biden’s GDP numbers were his inflation numbers, he and America would be in good shape economically. That they are not indicates why Biden is in such poor shape politically (RealClearPolitics’ average of national polling gives him just over a 40 percent approval rating). Biden’s upside-down economy has made things go sideways for America’s working families and created his downside-up political situation.
J.T. Young was a professional staffer in the House and Senate from 1987–2000, served in the Department of Treasury and Office of Management and Budget from 2001–2004, and was director of government relations for a Fortune 20 company from 2004–2023.