If Trump Won the 2020 Election, Would We Still Have Inflation?
By Valerie Rhea
The root causes of the inflation we’ve seen in the US since 2020 are the government’s monetary policy, the government’s regulatory stance, and other mostly political decisions.
As Nobel-winning economist Milton Friedman explained, “Inflation is always and everywhere a monetary issue” – too many dollars chasing too few goods. When the government inflates the money supply in the absence of economic growth, each dollar will be worth individually less. That should be common sense…if you have a company that’s worth $100 and it issues 100 shares of stock, each share is worth a dollar. If the company issues another 100 shares of stock, each share will decline in value – this is the essence of inflation.
What Caused the Expansion of the Money Supply?
Now, what caused the expansion of the money supply? For the first 18 months of the Biden administration, it was unbridled government spending…almost $3 trillion in net new spending was approved by Congress and signed into law by Biden in his first two years in office. That triggered a 27% rise in the money supply between 2020 and the end of 2021…more than at any time in recent US history, and a bigger hike than we saw in the prior ten years, combined.
Too Few Goods
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At the same time, if we look at the “too few goods” side of the equation, the Biden administration did what it could to keep people out of work during the pandemic, to restrict oil and gas consumption, and to institute cumbersome and costly regulations on business. At the same time, the government did little to break the logjam of supply chain disruptions that were occurring all over the world.
When we plug all this into our economic models, it wasn’t hard to predict that the result was likely to be inflation that peaked at over 9% and resulted in 20% price increases over the early years of the 2020s. The models I use professionally suggested an inflation peak of 9.5% – the actual observed number was 9.1%, so we were pretty close. But it’s not because we had some sort of magic crystal ball – it’s because the factors were fairly obvious.
In fact, the Biden administration knows what I say to be true – they have access to some of the world’s best economists, and no doubt they had even better numbers than I did. Remember that every time Joe Biden and his staff get in front of you and suggest it was Trump’s fault, or it’s price gouging by the market. No, it’s the policies the Biden administration imposed, and they are lying through their teeth when they tell you otherwise.
Inflation Under Trump
Now, some inflation would have occurred under Trump too because of the excessive spending during the pandemic. In 2020, Trump received Congressional authorization to spend about $650 billion on pandemic relief, although he only spent about half that by the time he left office. If he had been reelected, it’s safe to assume the rest of the $650 billion approved by Congress would have also been spent. But the trillions in new spending, the regulation orgy, and the war on gas and oil would never have occurred under a Trump administration.
When we plug those numbers into our economic models, we see that the inflationary peak would have been somewhere around 3.5%, adding up to a cumulative 7.5% price increase between 2020 and now.
the price tag for electing President Biden has been high inflation, high interest rates, slower economic growth, and an overall economy that’s about $5 trillion smaller than it would have been otherwise.
Higher Interest Rates
But, let’s not forget that since the inflationary spike’s 2022 peak, the Fed has been doing all it can to cool down the economy and keep inflation from spiking even further…that’s why we see home mortgage interest rates more than double from a few years ago. We’ve also settled for an average of 2.7% GDP growth under Biden – well under the massive post-pandemic rebound most economists predicted in 2020.
The point is, if we had managed to avoid Bidenflation, the economy would have grown significantly faster and current interest rates would be significantly lower. Models of GDP suggest that by the end of his term, Biden will have delivered about 11% in combined economic growth, but if Trump’s policies had simply been left intact, US GDP would have grown over 20%. Therefore, we can conclude that the price tag for electing President Biden has been high inflation, high interest rates, slower economic growth, and an overall economy that’s about $5 trillion smaller than it would have been otherwise.
Some might argue that Biden’s radical left agenda was worth this price…I suppose we will find out in November where the average American stands on these matters.
This article originally appeared on Quora here. And you can follow Valerie here.
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