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Trump and Biden share responsibility for inflation | Blogs

A chart of the US inflation rate is doing the rounds on social media, with President Biden’s length of service shaded in pink. The effect is to draw attention to the dramatic rise in inflation since Biden’s election.

The purpose of this image and similar images is to blame Biden for the inflation we are currently experiencing. Attached to the image are all the words you might expect: Democrats spending us in poverty, and so on.

Studying the chart, I noticed that inflation had actually started its dramatic rise several months before Biden moved into the White House, even though it was rising from what was then a low rate of inflation. .

Fiscal policy in the United States is largely set by the Federal Reserve, which is designed to operate independently of the president. The president appoints the chairman of the Fed (with the advice and consent of Congress), but the appointment of the chairman of the Fed is designed to overlap presidencies. So President Trump nominated our current Fed Chairman, Jerome Powell, for a four-year term beginning in 2018, and Biden will appoint the next one in 2022. Biden intends to reappoint Powell.

Early in his tenure, Powell worked to stimulate the economy to help it weather the remnants of the 2008 recession.

Then COVID happened. As the Beatles song says, “Life is what happens when you’re busy doing other things.”

COVID has caused a major shock to the economy, and the Fed has responded by pulling out all the stops. They increased the money supply (“printed money”) like a drunken sailor. Additionally, Trump has issued multiple stimulus checks to every Tom, Dick and Harry (with Republican support). It was a way to encourage demand for goods to help businesses that have been impacted by COVID. It prevented jobs from disappearing and helped keep businesses afloat.

You may recall that there were times when Trump was very critical of his own appointee for not providing enough stimulus to the economy. Trump even threatened to fire Powell (which the President can’t do), and Powell responded by muttering something about Fed independence. However, Powell continued and even accelerated his stimulus policies. The Fed bought record amounts of US debt with freshly minted money and kept interest rates at historic lows. All of this has contributed to increasing the demand for goods and services.

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By the time Biden took office, an astonishing 20% ​​of all US currency had been created in the previous 12 months. But experts have noted the negative impact of clogged supply routes, raw material shortages and backups at US ports.

The Fed worried the economy wouldn’t grow fast enough to overcome the damage inflicted by COVID, and Powell continued stimulus policies after Biden took office. Biden sent additional stimulus checks and funded infrastructure improvements (with the support of Democrats), just like Trump before him, all designed to avoid a recession.

Russia’s unforeseen war in Ukraine has further disrupted the global oil and grain supply chain, heightening the need for economic stimulus.

All that stimulation worked. The economy grew vigorously by 5.7% in 2021, after contracting in 2020. There is no recession and many factories are operating at full capacity. Wages are rising and there are plenty of jobs. The stock market has slipped from record highs, but is still higher than 12 months ago.

Unfortunately, economic stimulus is a double-edged sword. Too much demand for products leads to shortages and higher prices.

It takes two to four years for excessive monetary growth to manifest as inflation, and those chickens come home to roost. It is a cold consolation that other advanced countries are in the same boat.

I’m sure Republicans will continue to blame the incumbent for everything that happens during his tenure. If the tables were turned, the Democrats would do the same. But that doesn’t mean we have to fall for it.

Trump and Biden both share responsibility for inflation, as their own actions and appointees have supported inflationary fiscal policies. This was not done out of malice or stupidity, but rather out of a desire to save the country from recession and a selfish desire to have a vibrant economy when it came time to vote. Our leaders have overplayed their hand, and now we are going to face a period of inflation.

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