3 Reasons Money Experts Say Inflation Could Be Worse Under Biden Than Trump
Inflation — at 3% in June and down from 3.3% in May, according to the latest Consumer Price Index (CPI) data, released July 11 — remains a hot-button issue for both voters and presidential candidates.
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Depending on who cements the win in November, policy consequences could wildly differ and have an enormous impact on consumers.
Now, some experts argue that under a President Joe Biden win, inflation might be worse than under a Donald Trump presidency.
“As an advocate for pragmatic, pro-business policies, I firmly believe that Biden’s approach could exacerbate inflation,” said Josh Thompson, CEO, Impact Health USA.
According to Thompson, Biden’s policies, which focus on extensive government spending and stringent regulations, threaten to destabilize the economy by driving up prices, prompting Thompson to deem them “problematic.”
And several experts took issue with a July 11 Wall Street Journal economists survey, which found that “56% said inflation would be higher under another Trump term than a Biden term, versus 16% who said the opposite.”
For instance, Stephen Moore, senior visiting fellow in economics at The Heritage Foundation, said in a July 17 article that “this is a patently ridiculous conclusion.”
“Over Biden’s near-four years in office, inflation is up roughly 20%. Under Trump, inflation was up 8%,” Moore wrote. “So how could anyone argue that Biden will be better on inflation, given that his rate is nearly three times higher than Trump’s. This would be like saying a batter who has struck out four times in a row is more likely to hit a home run than a batter who has hit three homers in his last four at bats.”
Here’s a more detailed look at what a Biden presidency could mean for inflation.
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New Federal Initiatives and Expansion of Programs
According to Professor Ernie Goss, PhD, Creighton University’s Heider College of Business, and director of The Goss Institute for Economic Research think tank, Biden’s Inflation Reduction Act (IRA) of 2022 did not, and will not, cut inflation.
“And [it] will, in fact, add to inflationary pressures and the national debt for years to come,” said Goss. “For example, tax credits for businesses in the bill will reduce tax collections and subsidize increases in EV [electric vehicles] production despite consumer resistance.”
Impact Health’s Thompson also noted that Biden’s “massive” government spending programs are a recipe for inflation.
“Injecting large amounts of money into the economy without corresponding increases in productivity can lead to higher demand, outstripping supply and driving prices up,” he said. “This kind of fiscal irresponsibility risks destabilizing the economy.”
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Student Debt Forgiveness, Rent Cap and Microchip Programs
Goss also argued that Biden’s student debt forgiveness program will boost the nation’s debt.
The Committee for a Responsible Federal Budget shared that sentiment, noting that “most of these student debt cancellation policies have not only been costly, but also inflationary.”
In addition, Goss noted that Biden’s recent proposal to cap rents across the nation will result in shortages of apartment and housing rentals, putting further pressure on an already arduous housing market.
The proposal, announced on July 16, calls on Congress “to pass legislation presenting corporate landlords with a basic choice: either cap rent increases on existing units to no more than 5% or lose valuable federal tax breaks,” according to a White House fact sheet.
Finally, Goss said that Biden’s re-shoring of microchip manufacturing will cost taxpayers billions of dollars “via corporate giveaways.”
At a recent Senate Committee on Banking, Housing, and Urban Affairs hearing, ranking member Tim Scott (R-S.C.) also said that Biden’s policies are leading to more inflation.
“We should be talking about the inflation spike we are likely to see after billions and billions of dollars in student loans are illegally forgiven by this administration,” he said in remarks. “We should be talking about a federal debt that is growing by trillions of dollars every single year … It’s time for the Biden administration and their friends on the other side of the aisle to wake up and smell the coffee that now costs 30% more.”
Regulatory Changes and Labor Market Policies
According to Thompson, Biden’s regulatory agenda, particularly in the energy sector, is likely to increase production costs, and stricter regulations can constrain supply, exacerbating inflationary pressures.
“Stricter regulations mean businesses must spend more to comply, which translates to higher prices for consumers,” he said, adding that energy costs affect every aspect of the economy, and higher energy prices can lead to widespread inflation.
And in terms of labor market policies, Thomspon argued that while Biden’s push for higher minimum wages and enhanced worker protections are well-intentioned, they also can lead to increased labor costs for businesses.
“These costs are often passed on to consumers in the form of higher prices,” he said. “A more balanced approach that fosters job creation without burdening businesses is necessary.”
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. For more coverage on this topic, please check out 3 Reasons Money Experts Say Inflation Could Be Worse Under Trump Than Biden.
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