Understanding Inflation: A Comparative Analysis During Biden And Trump's Terms

Everything seems more expensive, and the government's statistics agree. The Consumer Price Index rose by 19 percent during the first 3 ½ years of Biden's presidency, according to Forbes magazine. Inflation actually peaked at a rate of 9 percent in the middle of 2022. The average cost of gasoline nationwide was $2.28 per gallon at the end of Trump’s term but has now risen to $3.24 last month – a 42 percent increase!

By way of comparison, prices only rose 6 percent during the first 3 ½ years of Trump’s presidency – a rate of slightly less than 2 percent per year (the Federal Reserve's long-term target is 2 percent). This significant difference in inflation rates prompts a closer examination of the economic policies and external factors that have led to these outcomes, and how they have impacted the average American household.

The Causes of Inflation

Inflation occurs when governments print or borrow too much money and inject it into the economy. To illustrate, economist Brian Westbury provides a simple analogy: Suppose I have 10 apples and you have $10 to spend. I will charge you one dollar per apple. However, if you suddenly have $20 to spend on those same apples, I can raise the price to two dollars each. The increase in available cash leads to a corresponding rise in prices.

This relationship shows that when the amount of money in circulation increases significantly without a corresponding increase in goods and services, prices will rise. Nobel Prize-winning economist Milton Friedman famously stated, "Inflation is always and everywhere a monetary phenomenon," emphasizing the fundamental connection between money supply and inflation rates.

How Inflation Affects Households

Consider the median household income in the United States, which was $70,784 in 2021. With the 19 percent inflation rate experienced over 3 ½ years under the Biden-Harris administration, that same household would now need to earn $84,233 in order to maintain their standard of living. This represents an additional $13,449 that families must find, whether through savings or borrowing, highlighting how inflation can feel like a theft of purchasing power.

Government officials should understand that printing or borrowing more money without addressing the underlying economic issues can actually harm every household. The Biblical commandment, "You shall not steal" (Exodus 20:15), illustrates the moral implications of such economic policies.

Massive Spending and Its Consequences

When Joe Biden took office on January 20, 2021, Democrats controlled both the House and Senate, leading to a rapid increase in government spending. The American Rescue Plan Act was signed into law on March 11, 2021, authorizing $1.9 trillion in additional spending under the guise of COVID-19 relief. Critics argued that this level of spending would likely lead to inflation, given that it accounted for nearly 29 percent of the federal budget from the previous year.

Furthermore, the Inflation Reduction Act authorized an additional $891 billion in government spending, which many view as contradictory to its title. This spending marks a total increase of $2.8 trillion, further inflating the economy and impacting the average consumer.

Comparing Inflation Rates Under Biden and Trump

Let’s take a closer look at inflation rates during the leadership of both Presidents:

• Trump Administration:
  • 2017: 2.1%
  • 2018: 1.9%
  • 2019: 2.3%
  • 2020: 1.4%
• Biden Administration:
  • 2021: 7%
  • 2022: 6.5%
  • 2023: 3.4%
  • 2024 (to August 31): 2.5%

While Democrats may point to a downward trend in inflation rates, it is crucial to highlight that prices continue to rise overall. Essential items such as groceries, gasoline, and housing remain costly, indicating that the effects of inflation are still deeply felt by the average consumer.

Impacts on Housing Market

The housing market has been particularly affected by rising inflation and increasing interest rates. Mortgage rates have surged from around 2-3 percent under Trump to between 6-7 percent under Biden, making it much more challenging for first-time homebuyers to afford homes. This rise in costs illustrates how inflation not only affects daily expenses but also long-term investments like housing.

Misunderstanding Price Increases

Vice President Kamala Harris recently attributed rising prices to "price gouging" by grocery stores. This perspective reflects a misunderstanding of free-market economics; if one store raises prices excessively, consumers will simply shift to competitors. Such market dynamics naturally regulate prices without the need for government intervention.

Price controls historically lead to shortages and over-supply of other items, resulting in unintended consequences. Harris's proposals echo a broader trend of attributing inflation to corporate greed rather than recognizing the underlying issues of excessive spending and monetary policy.

Final Thoughts on Political Spending and Economic Impact

My conclusion is clear: the voting record of Republicans suggests a greater likelihood of keeping inflation in check compared to the Democrats' tendency to ramp up government spending. The economic landscape we face today is a direct result of policy decisions made in Washington. As voters, we must recognize these patterns as we head to the polls in the upcoming elections.

Wayne Grudem is Distinguished Research Professor Emeritus of Theology and Biblical Studies at Phoenix Seminary in Arizona. The opinions expressed in this article are the opinions of the author and should not be understood to represent the opinions of Phoenix Seminary.

This article is co-published with permission from Townhall.