You've probably felt it at the grocery store or the gas pump—that stinging realization that twenty bucks just doesn't buy what it used to. It's frustrating. Honestly, it’s one of those things that keeps people up at night. For the last few years, the big question hanging over every dinner table and news cycle has been: What did Biden do to cause inflation?
Some people say he’s 100% to blame because of massive spending. Others swear it was all just global chaos that nobody could control. The truth, as it usually is with the economy, is a bit of a messy mix. It’s like a recipe where some ingredients were already in the bowl, and then the White House added a few more that made the whole thing boil over.
The $1.9 Trillion Spark: The American Rescue Plan
Basically, the biggest "smoking gun" critics point to is the American Rescue Plan (ARP) of 2021.
Remember those $1,400 checks? That was part of it. When Joe Biden took office in January 2021, the country was still shaking off the COVID-19 cobwebs. Most economists agree that some help was needed, but the size of the help is where the drama starts. We’re talking about a $1.9 trillion injection into an economy that was already starting to wake up.
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Larry Summers, a heavy-hitter economist who actually served under Democrats like Clinton and Obama, sounded the alarm early. He warned that dumping that much cash into the system would "set off inflationary pressures of a kind we have not seen in a generation." He turned out to be right. When you give millions of people extra cash at the same time that factories are struggling to produce goods, prices go up. It’s basic supply and demand. If ten people want the same bicycle and they all suddenly have more money, the person selling the bike is going to raise the price.
A study from the Federal Reserve Bank of San Francisco actually estimated that this specific spending plan contributed about 3 percentage points to the inflation rate by the end of 2021. That’s not the whole story, but it’s a big chunk.
Labor Markets and the "Great Reshuffle"
Another thing that happened—sort of a side effect of the policy—was a weirdly tight labor market.
Because of the enhanced unemployment benefits and the various stimulus rounds, some people were slow to get back to work. At the same time, businesses were reopening and desperate for staff. To get people to show up, businesses had to hike wages.
Now, higher wages sound great, right? They are, until the business has to cover those costs. Most companies don’t just eat the cost of higher wages; they pass it on to you. If the guy making your burger gets a $3 raise, your burger is probably going to cost an extra dollar. This created a "wage-price spiral" that kept the inflation fire burning longer than many expected.
The Energy Factor: Policies vs. Reality
You can’t talk about what Biden did to cause inflation without mentioning gas prices. This is where things get controversial.
On day one, Biden canceled the Keystone XL pipeline and paused new oil and gas leases on federal lands. Critics say this sent a "chilling effect" through the energy industry, making oil companies less likely to invest in new production because they didn't think the government would support them long-term.
However, if we’re being fair, U.S. oil production actually hit record highs under Biden eventually. The real "energy shock" came from the Russian invasion of Ukraine in 2022. That sent global oil markets into a tailspin. But the administration’s early rhetoric on "ending fossil fuels" definitely didn't help keep prices low at the start, as it created a lot of uncertainty in the markets.
The Things Out of His Control
It would be wrong to say Biden caused all of it. He didn't.
- Global Supply Chains: China was still locking down cities while Americans were trying to buy couches and cars. Those ships stuck off the coast of California weren't Biden's fault, but they meant there was less "stuff" to buy.
- The Fed: The Federal Reserve is technically independent. They kept interest rates at near-zero for way too long. By the time they started raising rates to cool things down, the "inflation monster" was already out of the cage.
- The "Trump" Carryover: A lot of the initial money printing and the first two massive stimulus bills (the CARES Act) happened under the previous administration. Biden basically took a house that was already full of dry wood and added a few more logs.
The Inflation Reduction Act: Did It Work?
In 2022, Biden signed the "Inflation Reduction Act." The name was a bit of a marketing play. Most non-partisan groups, like the Congressional Budget Office (CBO), said the bill would have a "negligible" effect on inflation in the short term.
It was more of a climate and healthcare bill. While it might lower costs for some people (like those on Medicare) down the road, it didn't do much to stop the price of eggs from going up in 2023. In fact, some argue that more government spending—even for good things like green energy—just adds more fuel to the inflationary fire.
What This Means for You Now
So, what’s the takeaway? Biden’s policies—specifically the massive $1.9 trillion stimulus—definitely acted as an accelerant. It made a global problem worse in the United States than it was in many other places. But he didn't invent inflation. He inherited a broken global supply chain and a world reeling from a pandemic.
Practical steps to handle the "New Normal":
- Audit your fixed costs. If you haven't shopped for car insurance or switched your cell phone plan in two years, you’re likely overpaying. Prices have risen, but competition is still a thing.
- Watch the Fed, not the White House. The President has very few "dials" to turn to stop inflation. The Federal Reserve's interest rate decisions are what will actually determine if your mortgage or car loan gets cheaper in the next year.
- Focus on "Core" expenses. Inflation hits hardest on "essentials" (food, energy, rent). If you can lock in a housing cost (like a fixed-rate mortgage) or find ways to cut energy use, you insulate yourself from the worst of the swings.
The economy is finally starting to "cool off," but "cooling off" doesn't mean prices go back to 2019 levels. It just means they stop rising so fast. Understanding the mix of government policy and global luck helps you see through the political noise and make better moves for your own wallet.
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Next Steps: You might want to track the Consumer Price Index (CPI) reports released monthly to see which sectors are still seeing price hikes. This can help you adjust your household budget in real-time.