Everything seems more expensive, and the government’s statistics agree. The Consumer Price Index rose by 19% during the first 3 ½ years of Biden’s presidency, according to Forbes magazine. Inflation actually peaked at a rate of 9% 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% increase!
By way of comparison, prices only rose 6% during the first 3 ½ years of Trump’s presidency -- a rate of slightly less than 2% per year (the Federal Reserve’s long-term target is 2%).
The causes of inflation
Inflation happens when governments print or borrow too much money and inject it into the economy. I recently heard economist Brian Wesbury give a simple example to show how this works (Westbury is the former Chief Economist, Joint Economic Committee of the U.S. Congress):
Suppose I have 10 apples and you have $10 to spend on apples. In that case, I will charge you one dollar per apple.
Now suppose I have 10 apples and you have $20 to spend on apples. In that case, I will charge you two dollars per apple.
The amount of cash available increased and the price of goods followed right along and increased as well. You pay more dollars, but you do not get any more apples.
To make an application, let’s say that my 10 apples represent the total output of goods and services in an economy in one year, and let’s say that your $10 (or $20) represents the total amount of money in the economy. When the amount of available money goes up, prices go up as well.
This is why Nobel prize-winning economist Milton Friedman could make a famous statement: “Inflation is always and everywhere a monetary phenomenon” (the word “monetary” here refers to the amount of money in an economy).
Inflation “steals” people’s money
Here is an example of the effect of inflation on ordinary Americans. The median household income in the United States in 2021 was $70,784. If a family lived on $70,784 in 2021, then after 3 ½ years of the Biden-Harris administration and a total of 19% inflation they would need $84,233 to purchase the exact same amount of goods and services in 2024. That means they would need to find an additional $13,449 somewhere – in savings if they have any savings, or perhaps put it on a credit card. In terms of our apples example above, they would be paying more dollars but just getting the same number of apples. We might even say that inflation has “stolen” $13,449 from that family, because that is how much extra money they need in order to maintain the same standard of living.
Government officials in any nation who think they can just print or borrow more money to pay for all their special projects, in spite of the inflation that printing or borrowing that money will cause, need to realize that willfully causing such inflation is actually stealing money from every household in their nation.
The Bible actually has something to say about stealing: “You shall not steal” (Exodus 20:15). This is commandment 8 of the Ten Commandments.
Massive spending by Democrats led to massive inflation
Joe Biden became president on January 20, 2021, and with Democrats in control of both the House and the Senate, there was nothing Republicans could do stop them. Soon the spending spree began.
The American Rescue Plan Act passed the Senate on March 6, 2021, by a vote of 50-49, with all Democrats voting for it and all Republicans voting against it (one was absent). It then passed the House on March 10 with a vote of 220-211 (all Republicans and one Democrat voted against it). President Biden signed it into law on March 11.
This bill was promoted as a further COVID-relief program, but Republicans criticized it as likely to cause inflation because it authorized $1.9 trillion in additional government spending. By way of comparison, in the previous year (fiscal year 2020, ending September 30, 2020), the federal government had spent $6.55 trillion, so this bill by itself was authorizing an additional amount of spending equal to 29% of the entire federal budget for the previous year. The GDP for the whole country in 2020 was $21 trillion, so adding $1.9 trillion in government spending meant adding an amount equal to 9% of the previous year’s total economic activity.
But that was not the end of the Democrats’ spending. On August 16, 2022, President Biden signed the Inflation Reduction Act, a bill that authorized the spending of another $891 billion.The bill had passed the Senate by 51-50, with all Democrats voting for it and all Republicans voting against it. Vice president Kamala Harris cast the tie-breaking vote. In the House, it had passed by a vote of 220-207, with all Democrats voting for it and all Republicans voting against it.
Calling this bill the Inflation Reduction Act seems to me to be almost comically deceptive, because it authorized $891 billion in additional spending by the government, which inevitably hadan inflationary impact. $891 billion equals 3.5% of the total GDP for the United States in 2022 (which was $25.4 trillion).
The bill would more accurately be described as the Inflation Multiplying and Green Energy Act because a large portion of the $891 billion was designated for climate change and green energy projects. Together these two bills added $2.8 trillion in government spending.
But didn’t Republicans vote for massive Covid relief in 2020?
At this point someone might object that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020, which was signed into law by President Trump on March 27, 2020, also contributed to inflation because it was a $2.2 trillion economic stimulus bill.
My response is that the CARES Act falls in a different category because the Covid 19 pandemic was driving our economy into recession and threatening intolerably widespread unemployment and the closing of millions of businesses. Both parties recognized the danger and the CARES Act passed the House on a vote of 419-6. It then was amended and passed the Senate by a vote of 96-0. The amended bill then returned to the House where it was passed on a voice vote on March 27, 2020, and signed by President Trump on the same day.
Both Republicans and Democrats agreed that Covid 19 had created a national emergency and that the CARES Act was necessary. That is a far different situation from the 2021spending sprees that were enacted by Democrats with no Republican support at all.
Finally, I should add that when President Biden took office, he issued executive orders restricting future oil and natural gas extraction, which immediately drove up energy prices, and this put added inflationary pressure on gas at the pump.Biden also shut down the Keystone XL Pipeline project, which would have connected the largest, most sophisticated oil refining hub in the Gulf Coast with access to U.S. and Canadian crude oil. This would have played a major role in ensuring long-term energy security for the United States. But because of environmentalists’hostility to fossil fuels (such as oil), Biden revoked the construction permit for the Keystone XL pipeline on January 20, 2021, his first day in office. This restriction of future supply of oil also had an inflationary effect.
Comparing inflation under Trump and under Biden
Here is a comparison of inflation rates under President Trump and under President Biden:
Trump | Inflation rate | Biden | Inflation rate |
2017 | 2.1% | 2021 | 7% |
2018 | 1.9% | 2022 | 6.5% |
2019 | 2.3% | 2023 | 3.4% |
2020 | 1.4% | 2024 (to August 31) | 2.5% |
Democrats see these figures and say, “Look! Inflation is coming down!” But what they fail to mention is that prices have not come down. Prices are still increasing, just not as rapidly. Groceries are still expensive. Gas for driving a car is still expensive. Houses are still expensive. The higher prices havealready been baked into the cake, and Americans continue to feel the results every time they go to the grocery store.
The cost of buying a house has been especially affected because the Federal Reserve Bank raised interest rates to try to dampen people’s inclination to spend and thus reduce the rate of inflation. But that meant that mortgage rates for buying a house went from somewhere in the range of 2%-3% under President Trump to the range of 6%-7% under President Biden, and the result is that it is difficult for first-time homebuyers to afford a significantly more expensive mortgage.
Kamala Harris wrongly blames “price gouging”
When Kamala Harris was asked what she would do to bring down inflation, she provided a classic example of the thinking of people committed to liberal economic policies. She said that grocery stores were guilty of “price gouging,” and her administration would investigate this and penalize any grocery stores that were raising their prices too much.
This answer reveals a troubling ignorance of how a free-market economy works. If our local Safeway grocery store suddenly raises prices to “gouging” levels (whatever that might be), we will simply go down the street to the Kroger’s store and buy our groceries there. If they raise their prices by very much, we will go a little further to Walmart, and so will hundreds of other customers. Grocery stores that try “price gouging” will soon have no customers and, unless they change, they will likely go out of business. Price competition in a free market will discipline grocery stores so that no government controls on prices are necessary. In fact, profit margins in the grocery industry are already notoriously thin, most often ranging from 1% to 3% of revenue.
In addition, government-imposed price controls have never worked. They will lead to shortages in some items, over-supply of other items, and increasing corruption through black-market sales and bribery of government officials.
But Harris’s response reveals three things: (1) She is ignorant of the fact that the problem of higher prices was created by excessive government spending of money. (2) She wrongly assumes that the problem was caused by the “greed” of “millionaires and billionaires” who own the grocery stores.(This is disturbingly similar to the communist doctrine that wealthy property owners -- the bourgeoisie -- are evil and must be overthrown and removed from power.) (3) She then proposes a new government program (control of grocery prices) that will further restrict our freedom and damage our economy. In short, she represents a traditional liberal mind that thinks, “Moregovernment spending and regulation is always the solution andis never the cause of the problem.”
Conclusion
My conclusion is that I will vote for Trump and other Republicans because their past voting pattern shows that they will be more likely to keep inflation under control. By contrast, the past voting pattern of Democrats shows that they will be more likely to ramp up government spending once again and bring back more painful inflation.
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.