The American people have the great pleasure of electing either Joe Biden or Donald Trump as president this year. With the election approaching, formal debates between the candidates have begun. A lot has been said about President Biden’s shaky performance or former President Trump’s comments on the 2020 election, but their comments on the economy or trade have seen less attention. Both presidents spent trillions on government programs, increased the national debt, and participated in protectionist trade policies. They tried to outdo each other in the debate, arguing about who was the most protectionist or who participated in the most price fixing. Looking past their performances and further into their comments on the economy is necessary.
Early in the debate Biden mentioned supporting rent caps and curbing other forms of “corporate greed”. Blaming current economic conditions on supposed corporate greed has been a common thread in the President’s messaging. Most people can assume correctly that corporations do exist to create value or profit for their shareholders. With that in mind, it makes no sense for corporations to be less greedy one year, but much greedier the next. It could not be businesses arbitrarily raising prices which has been causing inflation, as market signals would make it impossible for these corporations to raise their prices beyond what the consumer could handle. Additionally, this misunderstand what inflation is. Inflation is an increase in the money supply and credit in the economy, more expensive goods and services are an effect. The money supply increased greatly in 2020 and has not returned to pre-2020 numbers. Biden blaming corporations is simply a weak attempt to shift the blame.
The very large increase in the money supply and in credit in 2020 occurred under the direction of former president Trump. Trump claimed that his economy was great, but the obvious problem is that Americans were living in a bubble. Artificially low interest rates signaled incorrectly to market actors, resulting in poor investments and price increases. In addition to Trump’s low interest rates, he passed multiple very large spending bills, increasing the money supply and federal budget deficits. His policies of cutting taxes while increasing spending and cutting interest rates created a short term high in the economy, while leaving President Biden to deal with the after-effects.
President Biden’s large government programs have not helped with inflation, and likely increased the rate of inflation to some degree. Even if price caps or subsidies were known to be beneficial, they certainly wouldn’t be enough to assist the average American dealing with inflation in 2024. Continued expansion in the money supply and federal deficits are what need to be tackled, which would require significant spending cuts. Biden’s solution to every economic problem was to require the rich to pay more. Setting aside the basic idea that the state doesn’t spend money as effectively as successfully market actors do, the rich already pay quite a lot. The top 1% will pay almost a third of their income in taxes in 2024. Taxing productivity is not a long term solution to America’s economic problems or growing debt.
Both candidates agreed that protectionist economic policies were beneficial for Americans. Both candidates could not have been more wrong. When asked directly about the potential for tariffs to increase prices, Trump outright claimed that they will not. This is demonstrably false. The United States has no way to enforce taxes on another country, these higher costs predictably are passed down to manufacturers or business owners, which naturally pass the additional costs to consumers and have resulted in net job losses. Rather than pivoting from Trump’s terrible trade policies, Biden has doubled down, also painting China as an economic boogeyman.
Neither candidate correctly addressed the serious economic problems facing Americans. President Trump’s only economic positives were his desire to utilize American natural resources by approving the Keystone Pipeline and his decision to remove the United States from the economically disastrous Paris Agreement. Rather than making a sound appeal to the American voter, both candidates spoke in economic fallacies while comparing golf handicaps, all while the debt becomes increasingly expensive to manage and the inflation tax continues to steal from Americans.
