Reviews | President Biden’s economy fails the Big Mac test
Economic output, or gross domestic product, has exceeded its pre-crisis level.
Investors also have reason to be pleased: The S&P 500, a broad measure of the stock market, rose 19.3% in Mr. Biden’s first year as president. The steep market losses last week only erased a small portion of those gains.
The White House finds itself in the position of a doctor who administered successful treatment but neglected to prepare the patient for side effects or give a timeline for a full recovery. A lot of pain was avoided, but it’s hard to feel gratitude for things that didn’t happen. The economic outlook is strong, but it’s hard to feel gratitude for things that haven’t happened yet. Right now, the pain of inflation is front and center for most.
No one is surprised when recessions bring unpredictable disruptions. We are now reminded that recoveries are also complicated. People try to buy more cars than there are easily. The diners are more impatient than the waiters to return to the restaurant. The country’s cargo ports have been overwhelmed by an increase in imports.
Mr. Biden, however, has contributed to his own political woes. For much of the fall, the president and other administration officials appeared to downplay the dangers of inflation. Biden also continues to tout the administration’s longer-term economic initiatives, like antitrust enforcement and a push for child care subsidies, as moves that would help fight inflation. . The effect of such policies would not be felt for some time, and Mr. Biden’s insistence on this implausible narrative may help give the impression that he does not take inflation seriously.
The administration has failed to take action in some areas that could help contain inflation or mitigate its effects. Donald Trump’s tariffs on Chinese imports remain in place. Legal immigration continued to decline, exacerbating labor shortages. A year-long extension of the child tax credit has helped reduce the proportion of American children living in poverty to the lowest level since the government began keeping records in the 1960s. But Democrats , unable to agree on terms for permanent expansion, allowed expanded benefits to expire, depriving millions of working families of needed help.
Some of the president’s critics say the United States has missed a chance for Goldilocks recovery, neither too cold nor too hot. They argue that a smaller dose of economic aid would have generated growth without higher inflation. But European countries, which typically administered proportionally smaller doses of aid, are now experiencing both less inflation and slower recoveries. Critics should also bear in mind the not-so-distant past: in the aftermath of the 2008 crisis, the United States also provided an insufficient dose of aid. Inflation remained subdued, but that was little comfort to the millions of people who waited years to find work.
The challenge now is to bring inflation under control without harming the economic recovery. The work will primarily be done by the Federal Reserve, not Mr. Biden or his administration. The role of presidents in shaping the economic fortunes of the nation is generally overstated. But if the government can finish the job it started, this administration could still earn the victory laps it performs to successfully manage the national economy.