Former President Donald Trump, in his ongoing pursuit to regain his seat in the Oval Office, continuously castigates the Biden-Harris administration for their questionable record on inflation. During a rally in Mosinee, Wisconsin on September 7th, Trump faulted Vice President Kamala Harris, stating she ‘cast the tiebreaking votes that led to the worst inflation in American history, costing an average American family $28,000’. Pulling apart Trump’s claim reveals quite a few false notes and dubious angles. Following are the issues with his proclamation.
Let’s start with this ‘tiebreaking vote’ Trump referred to, which purportedly served as the catalyst for this historic inflation. It was for the motion to advance to a final Senate vote on the 2021 American Rescue Plan Act – a massive coronavirus relief bill put forth by President Joe Biden. This $1.9 trillion expenditure, exclusively championed by Democrats, contained generous payouts reaching 85% of American households, as well as a substantial sum allotted for state and local governments, and a significant extension of unemployment benefits.
Even during the bill drafting process, economists such as Larry Summers, former advisor to President Obama, voiced concerns about the risk of inflation. Their warnings were joined by those of fiscal conservatives. Retrospectively, it seems the economists were right. Economists now generally believe that Biden’s relief bill went too far, flooding the American market with unprecedented liquidity at a time when pandemic-induced supply chain disruptions were already creating significant economic imbalances.
The American Rescue Plan Act, a prodigious injection of money into an already volatile economy, was akin to adding fuel to the fire of inflation. However, it is not the sole causative factor. These same economists argue that the exacerbated supply chain disruptions were a critical factor in driving up inflation. Additionally, international events, such as Russia’s invasion of Ukraine in 2022, which caused oil prices and trade disruptions to soar, only served to compound this burgeoning crisis.
Mark Zandi of Moody’s Analytics maintains there are multiple factors contributing to the high inflation. According to Zandi, ‘both the worldwide pandemic and the Russian war top that list, while the impact of the American Rescue Plan caps it off.’ It’s worth noting, however, that other scholars, such as Harvard economist Jason Furman, attribute just 1 to 4 percentage points of the 2021 inflation rate to the American Rescue Plan. Similarly, Michael Strain of the conservative American Enterprise Institute placed the inflation contribution of the plan at 3 percentage points.
Other economists we consulted provided roughly similar estimations. President of the American Action Forum, Douglas Holtz-Eakin, ventured a 2-percentage point increase in U.S. inflation due to Biden’s legislation – an assessment shared by liberal economist, Dean Baker. It appears the consensus among economists is that the American Rescue Plan Act contributed to but was not singly responsible for the inflation surge.
As for the claim made by Trump that ‘the worst inflation in American history’ had occur under Biden’s administration, that seems a bit misleading too. Although it is fact that the year-over-year inflation rate reached about 9% in the summer of 2022, marking the highest rate in nearly four decades – it is far from the worst in American history. Interestingly, even this alarming inflation rate has started to fall since its peak under Biden, dropping to 2.9% in July 2024.
Former President Trump’s claim that the average American family has paid an additional $28,000 under Biden and Harris’s administration appears to be rooted in some degree of partisan economics. This particular figure, which his campaign confirmed, originates from an inflation tracker designed by the Republican staff of the Joint Economic Committee. This inflation calculator factored in the increased costs for regular household items like food, shelter, transport, and energy compared to January 2021 when Biden and Harris first took the oath.
Indeed, data does confirm there have been some serious financial impacts faced by American households as costs climbed. However, Trump’s claim misses out on another critical economic element that occurred during the Biden-Harris administration – wage growth. During their term, while prices escalated by 19.4%, wages too experienced a notable growth, increasing by 17.7%, thereby providing a buffer against the inflationary impact.
Trump’s demonization of the Biden-Harris administration also wrongfully ignores that wage increases have managed to keep pace with, and in some cases, even outpace inflation, depending on the chosen time frame for comparison. Reviewing figures from last month before the pandemic outbreak, which economists consider useful for comparison, it is seen that since then, while prices have surged by 20.9%, wages have witnessed an even stronger growth of 23.3%, thereby enhancing Americans’ spending power despite inflation.
The conclusion here isn’t that the Biden-Harris administration is guiltless in the surging inflation experienced by Americans. The historic tie-breaking vote cast by Vice President Kamala Harris played a role in passing the 2021 American Rescue Plan Act. This relief bill did contribute to the inflation problem, albeit not as the exclusive or even primary cause as Trump argued.
This inflation scenario witnessed in the country, with a peak year-over-year rate reaching 9% in 2022, might be the worst encountered in the last four decades, but it isn’t historically the most severe. And although the claimed additional expenditure of $28,000 by average households since Biden took office may hold some validity, it doesn’t incorporate wage adjustments which have helped offset rising costs.
In sum, President Trump’s statement has an undertone of truth but is stranded in a sea of critical overlooks. While it’s correct that Biden’s legislation helped to fuel inflation and increased household expenses, ignoring the wage gains and external factors at play, such as pandemic-induced disruptions and foreign geopolitical issues, results in a misleading impression of the economic realities under the Biden-Harris administration.