By now we are all familiar with the refrain that inflation cost Democrats the election. Critical accounts blame Joe Biden for driving prices higher with federal spending, while sympathetic treatments note a worldwide trend of inflation toppling governments around the world.
Neither assessment is quite right. Voters did indeed reject Kamala Harris over frustration with the Biden economy, but voters across the world are throwing out incumbents due to outrage over a very broad array of economic conditions. In Japan, inflation barely raised its head after the pandemic, and yet the reigning conservative government just took its biggest electoral hit in decades as its economy slips in and out of recession. The German economy hasn’t grown since the pandemic, and voters appear ready to oust the ruling center-left coalition as soon as they can. The U.K. is on its fourth prime minister since the pandemic and seems eager for a fifth.
The point here is not that the Biden administration was powerless to fight inflation—merely that every economic path out of the pandemic appears to have been durably unpopular. Much of the postmortem analysis of Biden’s economic performance amounts to a kind of wonked-up wishcasting: appeals to pet policies that would not have meaningfully restrained inflation, and which almost certainly would have generated a different set of unpleasant economic consequences. Democrats were not doomed from day one to lose the 2024 election, but getting them over the top would have required better politics from President Joe Biden, whatever the economics.
The Wall Street Journal lays out the standard conservative case against Biden, citing his $1.9 trillion COVID relief bill from early 2021 as the original sin that condemned Democrats to failure. But the Journal’s own numbers tell a different story, attributing only 0.6 percent of the total inflationary surge across 2021 and 2022 to Biden’s spending package. Inflation peaked in the summer of 2022 at 9.1 percent, meaning Biden barely added anything to the overall path of prices—a finding consistent with the prevailing consensus among economists. “The bottom line is that inflation’s rise and fall reflected primarily global drivers,” the International Monetary Fund concluded in September. Absent Biden’s stimulus, growth would have been weaker, unemployment higher, and wages lower—but prices would have been maddeningly high anyway.
Those knocking Biden for overspending, meanwhile, have been reluctant to detail just what they would have cut from what was indeed an ambitious economic agenda. Matthew Yglesias bemoans Biden’s supposed lack of urgency on inflation but can’t cite a fiscal misstep beyond student-debt forgiveness—a policy that the Supreme Court blocked, and which another student-debt hard-liner, the economist Jason Furman, calculated would have contributed only 0.2 or 0.3 percent to inflation anyway.
The problem with ripping Biden’s spending, of course, is that it was generally economically important and politically popular, to the extent that the public actually knew about it. Before Biden had even entered office, Democrats were framing the 2021 Senate runoffs in Georgia as a contest over an additional round of $1,400 stimulus checks—if Democrats won the seats, they’d use the resulting Senate majority to send cash to households, and they did. Biden’s opening stimulus legislation included not only those $1,400 victory checks but also one of his most successful policies: an expansion of the child tax credit from $2,000 per child to $3,600, ultimately reducing childhood poverty by 30 percent, to an all-time low. The program was so effective that both Harris and Trump campaigned on reviving it.
Even Biden’s sharpest intraparty critics on his opening stimulus legislation—Furman and perpetually perturbed economist Larry Summers—ultimately supported trillions of dollars in subsequent Biden spending on infrastructure, domestic microchip factories, and investments in clean energy technology. These bills were not written by progressive activists hopped up on TikTok, but rather negotiated with Senate Republicans and conservative Democrat Joe Manchin of West Virginia.
So if all of this spending was so good, why didn’t Biden deal with inflation in other ways? The short answer is that he did, and the long answer is that the economics profession approves of a very narrow range of anti-inflationary policies. When gas prices rose in the summer of 2022, for instance, Biden released oil from the Strategic Petroleum Reserve, expanding supply of a single key energy commodity to keep overall prices down. It seemed to work—that September, Republicans pulled advertising focusing on inflation because the message wasn’t landing with midterm voters.
But for decades economists have generally argued that inflation is the product of excessive household wealth. If prices are too high, the issue is that too many families have too much money. And the inflationary impact of giving money to working families can’t be nullified just by raising taxes on the very wealthy, big corporations, or some other undesirable element of society. Lower-income people are much more likely to spend their money than the wealthy are, which means that they put more upward pressure on prices than rich people do when they receive extra income. The options, in this telling, are to reduce the incomes of ordinary families or to expand overall production.
But of course expanding production was difficult, because supply chains were a mess in the aftermath of the pandemic. That was the whole problem, and the reason why inflation was a global phenomenon.
Housing is the single largest expense on most family balance sheets, so even before inflation really set in back in 2021, some wonks, including myself, were arguing for a specific policy agenda designed to prevent a surge in rent and home prices. Biden never did it, and prices did indeed go wild. Home prices are up an astonishing 47 percent since the pandemic, while rents are up more than 20 percent.
But the “I told you sos” from Yglesias, Ezra Klein, and Jerusalem Demsas are not terribly persuasive, however sensible their policy agenda may be. They’re right that it’s too difficult to build new housing—and anything, really—in the United States, due to the thicket of regulatory considerations that builders have to deal with. But massive housing swings like the one we saw during the pandemic are the product of major economic dislocations, not the steady accumulation of annoying rules. The housing price surge was really the product of two global crises: underbuilding after the 2008 mortgage crash, and unusual moving patterns caused by COVID-19. The homebuilding sector, meanwhile, is so sensitive to interest rate policy that some economists believe that the “business cycle” is better understood as the housing cycle. Eliminate all the rules you want—if the Federal Reserve raises rates like it did in 2022, new-home construction will still slow down.
And even if Biden had succeeded in building more homes, it’s still not obvious that the politics would have checked out. One reason local governments have so much trouble approving more housing is because a lot of people in cities and suburbs oppose building more housing. These people are very annoying, but they also vote.
None of the various inflation-reduction techniques floated since Trump’s victory would have achieved much, and all of them would have been accompanied by economic and political costs. We’re still running through the same list of old ideas—you should have spent less, or raised interest rates faster, or deregulated industry—with very little examination of the abnormalities that made the pandemic-era economy so difficult to navigate.
We still don’t know, for instance, why exactly U.S. inflation plunged from 9 percent to 3 percent without any substantive increase in unemployment or decline in wages. We don’t really know how the Fed’s interest rate increases actually affected wages, prices, and employment. The prevailing theory had been that higher rates cure inflation through layoffs, but when rates went up, the layoffs failed to arrive. Can this happy accident be repeated? Accelerated? What new emergency facilities might be developed to help mitigate future supply shocks?
In the United States, Joe Biden’s administration pursued a high-growth, high-employment strategy for pandemic relief, pledging trillions of dollars over the first two years of his presidency to invest in clean energy, domestic infrastructure, and working families. The result of all that work could not win Democrats the 2024 election, but as the Journal notes, it did create what is today “a remarkable economy” with “the wind at its back.” The labor market hasn’t been this strong for this long in 50 years, wage gains have been outpacing inflation for 18 months (longer for lower-income workers), and investments in domestic-microchip and electric-vehicle production are beginning to pay dividends. It’s “the envy of the world,” “bigger and better than ever,” leaving “other rich countries in the dust.” Sometimes your best just isn’t good enough.
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