As President Biden prepares to leave the White House, he leaves behind an economic legacy marked by a historic pandemic that has paralyzed consumers and businesses across the US.
After inheriting a Covid-stricken nation in 2021, Mr. Biden focused on righting the economy, a strategy that economists told CBS MoneyWatch is reflected in the country's solid GDP growth and low unemployment. By many key measures, the economy is stronger than it was four years ago: the unemployment rate is near a 50-year low, wages are rising and the Federal Reserve is stepping away from the recession expected by many on U.S. Wall Street. Managed to overcome. To curb inflation by increasing interest rates.
“He should have a strong legacy when it comes to the economy,” Mark Zandi, chief economist at Moody’s Analytics, said of Mr. Biden. “He inherited an economy that had completely flatlined because of the COVID pandemic, and he is leaving an economy that is flying high, at least overall.”
“How much credit he can take for this is a fair debate, but I think he deserves a lot of credit,” Zandi said.
Zandi pointed to several pieces of landmark legislation passed under Biden, including the $1.9 trillion American Rescue Plan Act, or ARPA, which helped stabilize the country and produce growth that has helped other major economies around the world. Economies have been left behind.
Biden also had some wins on health care, like a new $2,000 out of pocket A $35 spending limit on prescriptions and a $35 cap on insulin prices for Medicare enrollees.
Yet looking back, he said, the extra trillions in federal stimulus may have played a role in the past few years' rising inflation, which Zandi said was also fueled by the economic impact of Russia's invasion of Ukraine.
Zandi said, “ARPA was very controversial, but at the end of the day it got the economy back to full employment.”
deep structural problems
Although Biden's policies were crucial in helping the economy recover from the pandemic, millions of Americans are grappling with a cost-of-living crisis worsened by the hottest inflation in four decades. Long-term challenges to housing affordability deepened during the Biden administration, while American wealth inequality remains near record levels.
Sure, there are the costs of health care, child care, and education. overtook inflation For years, this has been burdening millions of families and leaving many families vulnerable to even the slightest recession. But a surge of inflation in 2022 could worsen these existing financial problems, said Lindsey Owens, executive director of the Groundwork Collaborative, a progressive economic think tank.
“There has been a lack of affordability for the biggest ticket items in the American economy for a long time,” Owens said. “Housing has become out of reach, health care has become expensive, child care is expensive — all of this was true before Biden.”
Meanwhile, Biden plans to eliminate massive student loan debt shot down by the courtsHowever, the Education Department used other methods to provide relief to millions of borrowers. Housing costs continued to rise under Biden due to rising home values as well as rising mortgage rates after the Federal Reserve raised interest rates to fight inflation.
The result: Under Biden, many families are grappling with the same long-term pocketbook issues that have been prevalent for decades under previous presidential administrations. During the pandemic, the rising cost of essentials like food, fuel and rent deepened the country's widespread precarity – a crippling sense of financial insecurity that has left millions of Americans facing job loss, medical problems and even minor Made vulnerable to economic decline.
debt balloon
Biden's legislative victories – ARPA and the Infrastructure Investment and Jobs Act in 2021, and the Inflation Reduction Act and CHIPS Act in 2022 – added trillions in additional federal spending. The idea behind these efforts was to rejuvenate the US economy by investing in key sectors, such as building semiconductor chip plants, rebuilding US roads or accelerating the shift towards green energy.
But economists say those efforts will take years to bear fruit. Meanwhile, the country's loan That has increased to a record $36.2 trillion as of mid-January due to a combination of fiscal stimulus authorized by both Biden and Trump, as well as Trump's 2017 tax cuts.
With federal spending exceeding revenues, the nation will face difficult choices, such as raising taxes, cutting federal programs, or both. Asked to describe Biden's economic legacy, Scott Lincicome, vice president of general economics at the Cato Institute, summed it up in one word: “Disappointing.”
“If you can look at the basic fundamentals — economic growth, jobs — things have been pretty good,” said Lincicome, who describes himself as a “libertarian free marketeer.” “But if you look deeper, there are some significant problems.”
Chief among them, Lincicome said, is the country's growing debt. Treasury yields are rising ahead of Trump's inauguration on Monday, partly due to concerns that the US could struggle to pay its debt in coming years.
“In terms of what Trump inherited — and it's not just Biden's fault, Trump also spent a lot of COVID — but we're at a point now where you can see that bonds “Markets are buzzing, and you can see that inflation continues to be higher than we expected,” Lincicome said. [Congressional Budget Office] “And many others agree that debt is a very serious issue.”
Trump's economy on January 20
Despite such concerns, economists interviewed by CBS MoneyWatch say Trump will inherit a relatively strong economy when he is inaugurated. It's not surprising, then, that Zandi and Lincicome gave the same advice to the Trump administration about how to handle the U.S. economy: “Do no harm.”
“The best thing Trump could do is do nothing,” Zandi said. “Biden's inherited a basket case economy and he's inheriting an economy that's running at full speed.”
For his part, Trump has signaled his intention to reshape the economy through a combination of more tariffs, deep tax cuts, fewer federal regulations and mass deportation of undocumented immigrants.
“Joe Biden's legacy has been marred by crippling inflation, a migrant crime onslaught and American weakness on the world stage,” Trump-Vance transition spokeswoman Anna Kelly said in a statement to CBS MoneyWatch. “Thankfully, in just five days, President Trump will usher in a new golden age of American success and fulfill his mandate to make America prosperous, safe, strong, and great again.”
Economists view some of Trump's announced plans as potentially inflationaryAlthough some question whether the President-elect will follow through on all of them, such as broad-based tariffs on all imports.
“We expect tariffs on imports from China and auto, but not universal tariffs, which would carry economic and political risks that we think the White House would prefer to avoid,” Goldman Sachs analysts wrote in a December research note. ”
Additionally, the Trump administration wants to extend its 2017 Tax Cuts and Jobs Act (TCJA), an effort of the non-partisan Congressional Budget Office. has projected The federal deficit could increase by $4.6 trillion over the next decade. Trump has vowed that his tariffs would raise enough money to cover the tax cuts, a proposal that economists consider unlikely.
Lincicome said the tariffs would “probably raise a few hundred billion dollars, but that's the total, and you're still in deep trouble.”
American elite
Given the TCJA cuts, extending the tax cuts would also benefit the nation's wealthiest families taxes for top earners Far more than among low- or middle-income Americans. Over the past four years, America's richest people have seen their wealth increase, with Elon Musk, the world's richest man and a close adviser and supporter of Trump, now worth $450 billion, up from $175 billion at the time of Biden's inauguration. More than double the total assets. According to the Bloomberg Billionaires Index 2021.
in his farewell message On Wednesday, Biden warned that the increasing concentration of wealth in America poses a serious threat to the nation.
“Today, an oligarchy of extreme wealth, power, and influence is taking shape in America that literally threatens our entire democracy, our basic rights and freedoms, and the fair opportunity for all to thrive,” Biden said.
That's unlikely to change under Trump, Owens said, adding that economists have predicted, “The big story of American inequality is simple: It's rising top incomes.”
He believes that “unless we tax the top level, we will have wild income inequality.”