July 25, 2024

Inflation Dulls Wealth Gains for Americans Under Biden Administration

American households’ net worth growth has stagnated during President Biden’s tenure, largely due to inflation, according to a recent analysis. The Wall Street Journal report compares the changes in household net worth since the beginning of Biden’s presidency with those during the first three years of his predecessor, former President Donald Trump, who is also the presumptive opponent in the 2024 election.

In nominal terms, the report shows that total household net worth increased by 19% during Biden’s first three years, a figure not far from the 23% rise witnessed during the initial three years of Trump’s presidency. However, this apparent growth is considerably less impressive when adjusted for inflation. After factoring in inflation, household net worth under Biden has grown by a mere 0.7%, compared to a robust 16% increase during Trump’s equivalent period.

At the time Biden assumed office in January 2021, the annual inflation rate in the U.S. stood at approximately 1.4%. Inflation subsequently soared, driven by global supply chain disruptions linked to the COVID-19 pandemic and substantial government spending, peaking at a 40-year high of 9.1% in June 2022. The federal government injected trillions of dollars into the economy to stimulate recovery amid the pandemic, a strategy initiated in the final phase of Trump’s administration and extended into Biden’s term.

Key legislative measures during this period include the $1.9 trillion American Rescue Plan Act, passed in March 2021, and the Inflation Reduction Act, an $891 billion package enacted in August 2022. These bills were approved along party lines by congressional Democrats through the budget reconciliation process. The Biden administration has attributed inflation primarily to global supply chain issues and has defended these fiscal policies as essential for providing economic relief to American households during the pandemic and addressing significant policy needs.

In response to inflation, the administration has undertaken actions such as releasing oil from the Strategic Petroleum Reserve to stabilize energy markets. Despite these efforts, the U.S. continues to grapple with elevated inflation, which was 3.4% in April, significantly above the Federal Reserve’s 2% target.

To counteract rising prices, the Federal Reserve has increased the benchmark federal funds rate to a target range of 5.25% to 5.50%, the highest level in over two decades. Fed policymakers have indicated that interest rates are likely to remain elevated longer than initially expected to further control inflation.

In summary, while nominal net worth figures suggest a comparable economic performance between the Biden and Trump administrations, the reality is more complex when inflation is taken into account. The minimal real growth in household net worth under Biden highlights the significant impact of inflation on American families’ financial health.


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