Is it fair to judge a president by the rate of inflation?
President Biden has been emphasizing that the rate of inflation has been dropping.
It was 9.1% in June of last year. It’s now 3.7%. Look at the good job he’s doing!
If it’s fair for him to take credit for that, then it’s also fair to note that the inflation rate was 1.4% when he took office.
Look at what a terrible job he’s done!
Inflation has more than doubled under President Biden’s watch. But, at one point in his term, it had been more than six times higher. So—is he a good steward of America’s economy or a bad one?
Really, we shouldn’t be judging on the basis of inflation at all, which is the rate of change in prices, but on the actual level of prices. Here’s a simple illustration. If you got paid $25 an hour when President Biden took office, you’d have to be earning $29.25 now to be able to buy the exact same goods and services you did then. In other words, if your salary hasn’t gone up by 17.4% since Biden took office, your opinion of Bidenomics won’t be very positive.
This, I believe, accounts for President Biden’s 64% disapproval rating on his economic performance in last week’s ABC/Washington Post poll. Being told that prices are rising—but not as fast as they used to be rising—doesn’t mollify a voter who only knows prices are higher now, by a lot, than when Biden took office. We Californians experience this with great poignancy when we fill up our cars. Statewide, the average price was $3.33 when President Biden started his term; it’s now $5.81.
If President Biden didn’t claim so much credit for the lowered inflation rate, he might escape some blame for the fact that prices have risen so much since he began, either. However, where very few voters have a refined notion of what causes prices to increase, taking the credit entails taking the blame, too. President Reagan famously coined the “misery index” to criticize President Carter: it was the sum of inflation and unemployment (16% for Carter at this time in his term; 9.5% at the comparable point of Reagan’s first term). “Misery” is now at 8.1%; it was 6.1% for Trump.
Despite Reagan’s skilled phrasing, I believe that the inflation rate was really not what voters used to judge Carter; the level of prices was. Looking at that number, consumers paid 26.2% more for the same goods and services at this point in Carter’s administration than they did when he started. Reagan’s comparable number was 11.5% for his first term; 8.4% in his second.
George H.W. Bush had to explain why prices were 12.8% higher at this point in his term; he couldn’t, and he lost. The two-term Presidents all had much better numbers: Clinton 7.2% and 5.0%; George W. Bush, 5.4% and 9.0%, Barack Obama, 7.2% and 3.5%. Pres. Biden’s 17.4% puts him squarely out of the two-term category.
Is it fair to judge a president by the level of prices? Monetary policy is the purview of the Federal Reserve Board, not the president. The Fed prints money, and if real production doesn’t grow as fast, prices have to rise. (It’s a century-old formula known in macroeconomics as the quantity theory of money).
It’s true the Fed went on a huge binge of printing money during COVID. But they did so to pay for President Biden’s $1.9 trillion stimulus bill, signed into law long after the worst of COVID had passed.
Larry Summers, President Clinton’s Treasury Secretary, called those stimulus checks the worst economic policy failure in forty years; and Janet Yellen, the current Treasury Secretary, has now admitted that they may have gone too far. President Biden thus won’t have the excuse that the Fed was to blame, not him.
A simple rule applies: the boss gets the credit, but the boss also gets the blame.
Tom Campbell is a professor of economics and a professor of law at Chapman University. He holds a Ph.D. in economics from the University of Chicago, and was Director of Finance for the State of California. He served five terms in Congress, including being a member of the Joint Economic Committee.