Bidenomics’ Role in Inflation Rise
TL/DR –
Joe Biden’s economic plan, dubbed Bidenomics, was marked by high spending on programs, people, political allies, and favored constituencies. This included unemployment relief, lowered gas prices, creation of manufacturing jobs, and a reduction in inflation. However, the spending reportedly led to a rise in inflation, voter dissatisfaction, and lackluster results in areas such as state and local government aid, school reopening funds, and the development of charging stations for electric vehicles.
Understanding Bidenomics: An Evaluation of President Biden’s Economic Policies
During his third year as President, Joe Biden focused on boasting about his accomplishments for the US economy. In February, he declared that his economic plan was working successfully, bringing down unemployment rate to 3.4 percent and reducing gas prices by $1.60 per gallon.
Biden repeatedly referenced his economic plan throughout 2022 and 2023, crediting his administration with the state of the economy. He claimed his economic plan was showing results and working.
In the summer of 2023, Biden gave his economic approach a name: Bidenomics, a term initially used by critics to deride his economic strategies. He claimed his approach was a break from the traditional economic theory and was working towards an economic agenda focusing on public investment in infrastructure and public education.
Biden credited three major laws he signed – the American Rescue Plan (ARP), the Infrastructure Investment and Jobs Act, and the Inflation Reduction Act – with helping to improve the US economy. However, voters showed low support for Biden’s handling of economic policy across nearly every demographic.
Biden’s economic plan emphasized government spending, contributing to a rapid rise in inflation and dissatisfaction among voters. The spending was often misdirected and counterproductive, leading to poor public payoffs.
Funding Public Schools and Infrastructure
The ARP authorized about $130 billion worth of spending on public schools but the funding could be used for purposes unrelated to the pandemic. Despite the funding, many schools remained closed for in-person education, damaging a generation of children. The longest school closures were driven by teachers unions.
The Bipartisan Infrastructure Law (BIL) was another major spending initiative under Biden. Costing $1.2 trillion, the law funded a range of projects from drunk-driving-prevention technology to new reporting requirements for cryptocurrency. However, the legislation was often inefficient, slow and wasteful.
Increasing Inflation and Corporate Affairs
In 2021 and 2022, US inflation began to rise rapidly, reaching levels not seen in four decades. Biden dismissed inflationary concerns, claiming the ARP did not cause inflation. However, a report by Federal Reserve Bank of St. Louis economists stated that pandemic spending played a significant role in excess inflation.
On the corporate front, Biden’s agenda extended into using federal subsidies and regulations to promote unionized factory production inside the US. His biggest initiative was the CHIPS and Science Act, which directed $76 billion to domestic manufacturing, particularly semiconductors. However, projects benefiting from this funding, such as a Phoenix microchip plant, faced delays and cost overruns.
Assessing the State of the Economy
Despite the challenges, the American economy at the end of 2023 appeared to be doing fairly well. Inflation rates had fallen and job growth remained steady. Yet, there is little evidence that Biden’s spending improved the American economy. Higher deficits led to more spending on interest, leading the CBO to release a long-term budget forecast warning of a challenging fiscal outlook due to large and sustained deficits.
By late November, the term Bidenomics disappeared from Biden’s prepared remarks, replaced with the more generic phrase “people over politics.” Democrats decided that their economic messaging would revolve around this new phrase, signaling the failure of Bidenomics.
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