As President Biden prepares to depart the White House, he leaves an financial legacy marked by a historic pandemic that paralyzed shoppers and companies throughout the U.S.
After inheriting a COVID-scarred nation in 2021, Mr. Biden targeted on righting the economic system, a technique that economists instructed CBS MoneyWatch is seen within the nation’s stable GDP development and low unemployment. By a number of key measures, the economic system is stronger than it was 4 years in the past: The jobless price is close to a 50-year low, wages are rising and the U.S. managed to sidestep a recession extensively anticipated by many on Wall Street because the Federal Reserve moved to curb inflation by ratcheting up rates of interest.
“He ought to have a robust legacy on the subject of the economic system,” Mark Zandi, chief economist of Moody’s Analytics, mentioned of Mr. Biden. “He inherited an economic system that was flat on its again due to the COVID pandemic, and he is leaving an economic system that is flying excessive, not less than within the mixture,”
Zandi added, “How a lot he can take credit score for that, it is a cheap debate, however I believe he deserves lots of credit score.”
Zandi pointed to a number of items of landmark laws handed beneath Biden, together with the $1.9 trillion American Rescue Plan Act, or ARPA, as serving to to stabilize the nation and produce development that has surpassed most different main economies around the globe.
Biden additionally rating some wins on well being care, equivalent to a brand new $2,000 out-of-pocket spending cap on prescriptions for Medicare enrollees and a $35 cap on insulin costs.
Yet looking back, he added, extra trillions in federal stimulus could have performed a component within the hovering inflation of the previous couple of years, which Zandi mentioned was additionally fueled by the financial influence of Russia’s invasion of Ukraine.
ARPA “was very controversial, however on the finish of the day it acquired the economic system again to full employment,” Zandi mentioned.
Deep structural issues
Although Biden’s insurance policies had been key in serving to the economic system get better from the pandemic, hundreds of thousands of Americans proceed to wrestle with a cost-of-living disaster worsened by the most popular inflation in 4 a long time. Long-term challenges in housing affordability solely deepened through the Biden administration, whereas U.S. wealth inequality at present stays close to file ranges.
To make certain, well being care, youngster care and training prices have outpaced inflation for years, weighing on hundreds of thousands households and making many households susceptible to even minor downturns. But the inflation spike in 2022 intensified these current monetary pains, mentioned Lindsay Owens, government director of the Groundwork Collaborative, a progressive financial suppose tank.
“The American economic system for a very long time has been characterised by a scarcity of affordability for the largest ticket gadgets,” Owens mentioned. “Housing has been out of attain, well being care has been costly, youngster care is pricey — that was all true earlier than Biden.”
Meanwhile, a Biden plan to comb away pupil mortgage debt was largely shot down by the courts, though the Department of Education used different means to supply reduction to hundreds of thousands of debtors. Housing prices continued to soar beneath Biden resulting from rising residence values in addition to hovering mortgage charges after the Federal Reserve hiked rates of interest to battle inflation.
The upshot: Under Biden, many households remained dogged by the identical long-term pocketbook points which have prevailed for many years beneath earlier presidential administrations. During the pandemic, the hovering value of necessities like meals, gasoline and lease solely deepened the nation’s widespread precarity — a gnawing sense of economic insecurity that has left tens of hundreds of thousands of Americans susceptible to job losses, medical issues and even modest financial dips.
Ballooning debt
Biden’s legislative wins — ARPA and the Infrastructure Investment and Jobs Act in 2021, and the Inflation Reduction Act and the CHIPS Act in 2022 — added trillions in extra federal spending. The thought underlying these efforts was to rejuvenate the U.S. economic system by investing in key sectors, equivalent to by constructing semiconductor chip crops, rebuilding U.S. roads or accelerating the shift towards inexperienced power.
But these efforts will seemingly take years to repay, economists be aware. In the meantime, the nation’s debt has ballooned to a file $36.2 trillion as of mid-January resulting from a mixture of fiscal stimulus approved by each Biden and Trump, in addition to Trump’s 2017 tax cuts.
With federal spending outpacing revenues, the nation will face robust selections, equivalent to whether or not to lift taxes, reduce federal applications or each. Asked to explain Biden’s financial legacy, Cato Institute vp of basic economics Scott Lincicome summarized it in a single phrase: “Frustrating.”
“If you can take a look at the essential fundamentals — financial development, jobs — issues have been fairly good,” Lincicome, who describes himself as a “libertarian free marketer,” added. “But in the event you look beneath the hood, there are some fairly vital issues.”
Chief amongst them are the nation’s spiraling debt, Lincicome mentioned. Treasury yields have been rising forward of Trump’s inauguration on Monday, partly resulting from issues that the U.S. may wrestle in coming years to service its debt.
“In phrases of what Trump inherits — and it is not simply Biden’s fault, Trump did lots of COVID spending, too — however we’re now at some extent the place you’ll be able to see bond markets are chirping, and you may see inflation has remained stubbornly greater than we’d have hoped,” Lincicome famous. “The [Congressional Budget Office] and lots of people agree that the debt is a reasonably urgent situation.”
Trump’s economic system on Jan. 20
Despite such issues, the economists interviewed by CBS MoneyWatch say that Trump will inherit a comparatively sturdy economic system when he is inaugurated. Not shocking, then, that Zandi and Lincicome had the identical recommendation for the Trump administration in the way it handles the U.S. economic system: “Do no hurt.”
“The neatest thing Trump may do is do nothing,” Zandi mentioned. “Biden acquired a basket case economic system and he is bequeathing an economic system that’s working at full tilt.”
For his half, Trump has signaled his intent to reshape the economic system by way of a mixture of steeper tariffs, deeper tax cuts, fewer federal rules and mass deportations of undocumented immigrants.
“Joe Biden’s legacy is marred by crippling inflation, a migrant crime invasion and American weak point on the world stage,” Trump-Vance Transition Spokesperson Anna Kelly mentioned in an announcement to CBS MoneyWatch. “Thankfully, in simply 5 days, President Trump will usher in a brand new Golden Age of American success and perform his mandate to make America rich, secure, sturdy and nice once more.”
Economists view a few of Trump’s said plans as potentially inflationary, though some query whether or not the president-elect will observe by way of with all of them, equivalent to a broad-based tariff on all imports.
“We count on tariffs on imports from China and autos, however not a common tariff, which might carry financial and political dangers that we expect the White House will favor to keep away from,” Goldman Sachs analysts wrote in a December analysis be aware.
At the identical time, the Trump administration needs to increase his 2017 Tax Cuts & Jobs Act (TCJA), an effort the nonpartisan Congressional Budget Office has projected may add $4.6 trillion to the federal deficit over the subsequent decade. Trump has vowed that his tariffs would increase sufficient cash to cowl the tax cuts, a proposition that economists assess as unlikely.
Tariffs may increase “just a few hundred billion, perhaps, however that is complete, and you are still in an enormous gap,” Lincicome famous.
American oligarchs
Extending the tax cuts would additionally seemingly favor the nation’s wealthiest households, on condition that the TCJA reduce taxes for top earners way over for low- or middle-income Americans. During the previous 4 years, America’s richest folks have seen their wealth soar, with Elon Musk — the world’s richest particular person and a detailed adviser and backer of Trump — now price $450 billion, greater than double his $175 billion internet price when Biden was inaugurated in 2021, in response to the Bloomberg Billionaires Index.
In his farewell message on Wednesday, Biden warned that the rising focus of wealth within the U.S. poses a severe danger to the nation.
“Today, an oligarchy is taking form in America of utmost wealth, energy and affect that actually threatens our complete democracy, our primary rights and freedoms and a good shot for everybody to get forward,” Biden mentioned.
That’s unlikely to alter beneath Trump, economists predicted “The massive story of American inequality is a straightforward one: It’s the takeoff in prime incomes,” Owens famous.
She believes that “Until we tax the highest, we may have runaway revenue inequality.”
