Biden Inflation Plummets to Record Lows — Were Prices Lower in the Trump Economy?
Written by
Yaël Bizouati-Kennedy
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Inflation is decelerating, albeit at a slower pace than many Americans and officials would like it to. The latest Consumer Price Index (CPI) came in hotter than expected, at 3.1% in January, compared to the 2.9% expected by Wall Street Journal economists. It is still down from December’s 3.4%, but increased 0.3% for the month, according to a Bureau of Labor Statistics (BLS) Feb. 13 release.
Shelter prices continued to be the main driver of inflation and food prices increased again in January, continuing to hit Americans at the grocery store.
This latest data set also comes amid a presidential election cycle in which inflation is a hot-button issue for many Americans and candidates.
And it is still ways off the Federal Reserve’s 2% target which might delay rate cuts many expected earlier in the year. Yet, compared to where inflation stood the past two years — 6.4% in January 2023 and 7.5% in January 2022 according to BLS data — much progress has been made.
How Did Prices Differ Under the Last Two Presidents?
First, there are stark contrasts in economic circumstances under the two last presidencies. For instance, the pandemic had several ramifications on the economy and the Russia-Ukraine war pushed gas and some food prices higher.
According to Moody’s Analytics chief economist Mark Zandi, inflation under former President Donald Trump was too low – consistently below the Federal Reserve’s 2% target.
“The Fed was working hard to get inflation up,” said Zandi. On the other hand, inflation under President Joe Biden has been too high – above the Fed’s target, he added.
“Of course, inflation during Biden’s term has been juiced up by the economic fallout from the pandemic due to supply chain and labor market disruptions and the Russia-Ukraine war due to higher energy and agricultural prices,” he said. “Fortunately, as the impact of these massive supply shocks to the economy have faded, inflation has moderated and is currently quickly closing in on the Fed’s target.”
Were Prices Lower Under Trump?
According to a Yahoo Finance analysis, under Trump, overall inflation stood at 6.2% during the first three years of his presidency. Under Biden, it was 17.9%.
In terms of specific prices, rents rose 11.3% under Trump and 19.5% under Biden. Grocery prices rose 2.4% under Trump and 21% under Biden. Meanwhile, transportation, including the cost of vehicles, insurance, maintenance and gasoline rose 4.5% under Trump and are up 27.5% under Biden, according to the analysis.
Yet, some prices have also decelerated under Biden, including healthcare, 6.7% vs. 8.6%; college tuition, 5.6% vs. 7.2%; and prescription drugs, 4.4% vs. 4.3%.
In another analysis averaging the year-over-year monthly rates of inflation conducted by Peter C. Earle, senior economist, American Institute for Economic Research, for January 2017 to January 2021, CPI rose 1.89%, while core CPI — which excluded volatile food and gas prices — rose for 1.95%.
Meanwhile, the average year-over-year monthly rates of inflation for headline and core CPI between January 2021 to January 2024 are much higher, he said: 5.54% for CPI and 4.80% for core.
Earle said that those are price indices, and even though they deal with price changes, the actual nature of changing prices that consumers see on shelves is somewhat obscured.
In turn, Earle looked at the average prices of some actual goods in U.S. dollars in January 2017, January 2021, and then, according to BLS data.
For instance, he looked at prices of white bread: $1.351 (Jan. 2017), $1.546 (Jan. 2021), $2.204 (Jan.2024); 100% ground beef: $3.553 (Jan 2017), $3.965 (Jan 2021), $5.21 (Jan 2024); grade A large eggs: $1.599 (Jan 2017), $1.466 (Jan 2021), $2.507 (Jan 2024).
“By every measure, prices for U.S. consumers have risen by much more, and across a broader number of goods and services, over the past four years (2021 to 2024) than during the previous four years (2017 to 2021),” Earle said.
Where Will Inflation and Prices Go From Here?
Against this backdrop, some experts also argued that it’s important to make a difference between inflation and cost of living.
“If one is measuring inflation using CPI, any number over zero equals pain for consumers — especially those that are least able to cope with it,” said Vijay Marolia, founder, of The Cash Square. “Said differently, even relatively small increases in CPI will translate into many people having to choose between expenses that will significantly affect their lifestyle.”
On the heels of the hotter-than-expected CPI, other experts also noted that the report “is a reminder that inflation is a difficult, not-well-understood problem that doesn’t move in a straight line.”
“Given that core CPI came in at 3.9% again – and didn’t drop to 3.7%, which was the consensus forecast – then it not only throws the timing of Fed rate cuts into question but potentially opens the door to a possibility that we haven’t seen the last Fed rate hike in this cycle,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.
Whether or not inflation will reach the Fed’s target remains to be seen, and some experts call the 2% goal “unrealistic,” even if inflation dips slightly.
“Currently, the economy is in a rebalancing phase,” said Joe Camberato, CEO of the National Business Capital. “We don’t want growth to slow to a halt. I’m worried about the consequences of hitting that target; we risk stifling economic growth, which would have the reverse effect, and that would be terrible for everyone involved.”
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