Is inflation Biden’s or Trump’s fault? The answer isn’t so simple

Former President Donald Trump, left, and President Joe Biden face off in the first debate of the 2024 presidential campaign, in Atlanta, June 27, 2024.

Andrew Harnik | Getty Images News | Getty Images

The recent U.S. presidential debate saw both candidates trade barbs related to the economy. High pandemic-era inflation was among the grievances.

“He caused the inflation,” Trump said of Biden during the June 27 debate. “I gave him a country with no, essentially no inflation,” he added.

Biden countered by saying inflation was low during Trump’s term because the economy “was flat on its back.”

“He decimated the economy, absolutely decimated the economy,” Biden said.

But the cause of inflation isn’t so black-and-white, economists say.

In fact, Biden and Trump are not responsible for much of the inflation consumers have experienced in recent years, they said.

‘Neither Trump nor Biden is to blame’

Global events beyond Trump’s or Biden’s control wreaked havoc on supply-and-demand dynamics in the U.S. economy, fueling higher prices, economists said.

There were other factors, too.

The Federal Reserve, which acts independently from the Oval Office, was slow to act to contain hot inflation, for example. Some Biden and Trump policies such as pandemic relief packages also likely played a role, as might have so-called “greedflation.”

“I don’t think it’s a simple yes/no kind of answer,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, a left-leaning think tank.

“In general, presidents get more credit and blame for the economy than they deserve,” he said.

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That Biden is seen as stoking high inflation is due somewhat to optics: He took office in early 2021, around the time inflation spiked notably, economists said.

Likewise, the Covid-19 pandemic plunged the U.S. into a severe recession during Trump’s tenure, pulling the consumer price index to near zero in spring 2020 as unemployment ballooned and consumers cut spending.

“In my view, neither Trump nor Biden is to blame for the high inflation,” said Mark Zandi, chief economist at Moody’s Analytics. “The blame goes to the pandemic and the Russian war in Ukraine.”

The big reasons inflation spiked

Inflation has many tentacles. At a high level, hot inflation is largely an issue of mismatched supply and demand.

The pandemic upended the typical dynamics. For one, it disrupted global supply chains.

There were labor shortages: Illness sidelined workers. Child-care centers closed, making it hard for parents to work. Others were worried about getting sick on the job. A decline in immigration also reduced worker supply, economists said.

China shut down factories and cargo ships couldn’t be unloaded at ports, for example, reducing the supply of goods.

Meanwhile, consumers changed their buying patterns.

They bought more physical stuff such as living room furniture and desks for their home offices as they spent more time indoors — a departure from pre-pandemic norms, when Americans tended to spend more money on services such as dining out, travel, and going to movies and concerts.

Cargo containers sit stacked on ships at the Port of Los Angeles, the nation’s busiest container port, in San Pedro, California, on Oct. 15, 2021.

Mario Tama | Getty Images News | Getty Images

High demand, which boomed when the U.S. economy reopened broadly, coupled with goods shortages fueled higher prices.

There were other related factors, too.

For example, automakers didn’t have enough semiconductor chips necessary to build cars, while rental car companies sold off their fleets because they didn’t think the recession would be short-lived, making it pricier to rent when the economy rebounded quickly, Wessel said.

As Covid cases were hitting record highs heading into 2022, further disrupting supply chains, Russia’s war in Ukraine “supercharged” inflation by stoking higher prices for commodities such as oil and food around the world, Zandi said.

As a result, global inflation hit a level “higher than seen in several decades,” the International Monetary Fund wrote in October 2022.

“We only have to look at the still high inflation rates in most other advanced economies to see that most of this inflation period was really about global trends … rather than about the specific policy actions of any given government (though they did of course play some role),” Stephen Brown, deputy chief North America economist for Capital Economics, wrote in an e-mail.

Big spending bills’ impact ‘only clear in hindsight’

The Fed and ‘greedflation’

Fed officials also have some responsibility for inflation, economists said.

The central bank uses interest rates to control inflation. Increasing rates raises borrowing costs for businesses and consumers, cooling the economy and therefore inflation.

The Fed has raised rates to their highest in about two decades, but was initially slow to act, economists said. It first increased them in March 2022, about a year after inflation started to spike.

It also waited too long to throttle back on “quantitative easing,” Strain said, a bond-buying program meant to stimulate economic activity.

“That was a mistake,” Zandi said of Fed policy. “I don’t think anyone would have gotten it right given the circumstance, but in hindsight it was an error.”

Some observers have also pointed to so-called “greedflation” — the notion of corporations taking advantage of the high-inflation narrative to raise prices more than needed, thereby boosting profits — as a contributing factor.

It’s unlikely this was a cause of inflation, though it may have contributed slightly, economists said.

“To the extent anything like that happened — which I’m not sure it did — this would be a very minor factor in the inflation we had,” said Strain. He estimates the dynamic would have added well less than 1 percentage point to the inflation rate.

“Companies always look for an opportunity to raise prices when they can,” Wessel said. “I think they took advantage of the inflationary climate, but I don’t think they caused it.”

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