Trump and Biden play blame game on inflation. Here's what prices did under their watch.

By Jeffry Bartash

Massive government stimulus contributed to surge in prices

The biggest surge in inflation in 40 years could end up deciding the 2024 presidential election - and President Joe Biden and former President Donald Trump each sought to outflank each other on the topic in Thursday's debate.

"He has not done a good job. He has done a poor job. And inflation's killing our country. It is absolutely killing us," Trump said.

Biden countered with a claim that there was "no inflation" when he took office. He also charged that Trump's pandemic-related policies helped cause prices to soar.

Before the pandemic, inflation had been unusually low. Prices rose an average of 1.7% a year from the end of the 2007-09 recession until 2019.

Cumulative prices rose 5.4% during President Barack Obama's second term, which ran from January 2013 to January 2017.

Inflation increased by a combined 7.3% during Trump's four years in office, the CPI showed.

In Biden's three and a half years in office, inflation has risen by a combined 19.4%, including an 8% annual increase in 2022.

What's to blame for high inflation? Economists cite a number of factors.

Massive government spending, first by Trump and then by Biden, to cope with the economic fallout from the pandemic.The Federal Reserve's March 2020 decision to slash a key short-term interest rate to zero and to buy trillions of dollars of Treasurys and mortgage-backed securities. These moves drove down interest rates and poured money into the economy. The Fed then kept rates too low for too long, critics say.Stimulus policies carried out by other countries to shore up their own economies.Huge bottlenecks in the global trading system that limited the flow of key supplies during the pandemic. Most notably, a shortage of computer chips hobbled the production of new cars and drove the price of cars and trucks to record highs.

How much blame goes to government spending, the part that Trump and Biden could control?

Economists say it's impossible to know for sure, given the variety of factors involved. They also note the economy could have suffered far greater damage without any stimulus at all, which could have been more costly in the long run.

The most fateful decision by Biden was the $1.9 trillion stimulus package of March 2021, which included $1,400 checks for most Americans. The bill was passed two months after he took office.

The plan was put into place even though the economy was already undergoing a strong recovery.

Some economists contend it exacerbated the emerging bottlenecks in global supply chains and contributed to runaway inflation. Consumers around the world had plenty of money to spend, but businesses could not supply all the goods and services they wanted.

Most famously, Lawrence Summers, who served as Treasury secretary under President Bill Clinton and as an economic adviser to President Barack Obama, warned in a Washington Post opinion piece in February 2021 - a month before the Biden plan passed - that the new U.S. stimulus "could set off inflationary pressures of a kind we have not seen in a generation."

The rate of inflation, as it turned out, jumped to as high as 9.1% in mid-2022, from 1.4% at the start of Biden's presidency.

Consumer-price inflation has since slowed to 3.3%, but it's still almost double the prepandemic average.

-Jeffry Bartash

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07-02-24 0948ET

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