Is Inflation Biden's or Trump's Fault? The Answer Isn't That Simple

The last US presidential debate saw the candidates trade barbs about the economy, with high inflation in the pandemic era among the complaints.

“He caused inflation,” Trump said of Biden during the June 27 debate. “I gave him essentially a zero-inflation country.”

Biden responded by saying that inflation was low during Trump's term because the economy “was in recession.”

“It destroyed the economy, it completely destroyed the economy,” Biden said.

But the causes of inflation are not so clear, economists say.

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

Global events beyond Trump or Biden's control have wreaked havoc on supply and demand dynamics in the U.S. economy, sending prices soaring, economists say.

There were other factors too.

For example, the Federal Reserve, which operates independently of the Oval Office, has been slow to act to contain hot inflation. Some of Biden and Trump’s policies, such as pandemic relief packages, are also likely to play a role, as is so-called “predatory inflation.”

“I don’t think the answer to this question is a simple yes or no,” said David Wessel, director of the Hutchins Center for 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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Biden’s perception of stoking high inflation is partly a matter of appearances: He took office in early 2021, at a time when inflation was rising significantly, economists say.

Similarly, the COVID-19 pandemic pushed the United States into a deep recession during the Trump administration, sending the consumer price index to near zero in the spring of 2020 as unemployment soared and consumers cut spending.

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

Inflation has many arms. At a high level, hot inflation is essentially a case of mismatch between supply and demand.

The pandemic has upended traditional dynamics. On the one hand, it has disrupted global supply chains.

There was a labor shortage: The disease sidelined workers. Child care centers closed, making it harder for parents to work. Others worried about getting sick on the job. Economists said the decline in immigration also squeezed the supply of workers.

For example, China has closed factories and cargo ships have been unable to unload their cargo at ports, reducing the supply of goods.

At the same time, consumers have changed their purchasing patterns.

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

High demand, which has surged as the U.S. economy has broadly reopened, coupled with shortages of goods, has driven up prices.

There were other factors involved as well.

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

With coronavirus cases hitting record highs heading into 2022, further disrupting supply chains, Russia's war in Ukraine has “fueled” inflation by stoking prices for commodities like oil and food around the world, Zandi said.

As a result, global inflation has reached a level “higher than we have seen in several decades,” the IMF wrote in October 2022.

“We need only look at the high inflation rates in most other advanced economies to see that much of this inflationary period was actually due to global trends… rather than to specific policy actions by any one government (though they certainly played some role),” Stephen Brown, deputy chief economist for North America at Capital Economics, wrote in an email.

Yet Biden and Trump are not entirely without fault: They green-lighted extra government spending in the pandemic era that contributed to inflation, for example, economists have said.

For example, the American Rescue Plan — the $1.9 trillion stimulus package that Biden signed in March 2021 — provided $1,400 stimulus checks, enhanced unemployment benefits, and a larger child tax credit for families, among other relief.

The policy has led to “some good things,” such as a strong labor market and low unemployment, said Michael Strain, director of economic policy studies at the American Enterprise Institute, a right-leaning think tank.

But it was larger than the U.S. economy needed at the time, and it raised prices by putting more money in consumers' pockets, which fueled demand, he said.

“I think President Biden bears some responsibility for the inflation we’ve had over the past few years,” Strain said.

The US rescue plan is estimated to have added about 2 percentage points to core inflation. The consumer price index peaked at about 9% in June 2022, the highest level since 1981. It has since fallen to 3.3% as of May 2024.

The Federal Reserve – the US central bank – aims for a long-term inflation rate close to 2%.

“I think without the US bailout, inflation would have continued to rise in the US. So I think it's important not to overstate the situation,” Strain added.

However, Zandi saw the inflationary impact of the monetary stimulus program as “good” and “desirable,” as it brought the economy back toward the Fed's long-term inflation target after a long period of below-average inflation.

Trump also approved two stimulus packages, in March and December 2020, worth about $3 trillion.

So-called “fiscal policy” responses were insurance against a poor economic recovery, and may have been overdone after the United States’ lackluster response to the Great Recession that plunged the country into years of high unemployment, Wessel said.

He said the US issuing too much stimulus may have been the presidents' fault, but “that's only clear in retrospect.”

Economists said Biden and Trump have also approved other policies that could contribute to higher prices.

For example, Trump imposed tariffs on steel, aluminum, and a range of other goods from China, which Biden largely kept in place. Biden also imposed new taxes on Chinese imports of goods such as electric vehicles and solar panels.

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

The central bank uses interest rates to control inflation. Higher interest rates make it more expensive for businesses and consumers to borrow, which slows the economy and leads to inflation.

The Federal Reserve raised interest rates to their highest levels in nearly two decades, but was initially slow to act, economists said. It raised them for the first time in March 2022, nearly a year after inflation began to rise.

The central bank also waited too long to ease its “quantitative easing” measures, a bond-buying program aimed at stimulating economic activity, Strain said.

“It was a mistake,” Zandi said of the Fed's policy. “I don't think anyone could have made the right decision under the circumstances, but in hindsight it was a mistake.”

Some observers have also pointed to so-called “predatory inflation” — the concept of companies exploiting the narrative of high inflation to raise prices more than necessary, thus boosting profits — as a contributing factor.

Economists said this was unlikely to have caused inflation, although it may have contributed a little.

“If anything like that had happened — which I’m not sure about — it would have been a very minor factor in the inflation we’ve seen,” says Strain. He estimates that this dynamic would have added much less than one percentage point to the inflation rate.

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