Economists argue that high inflation is not primarily the responsibility of either Biden or Trump.

• The Bureau of Labor Statistics announced on Thursday that the consumer price index remained stable in June 2024.
• In 2022, the annual inflation rate reached a pandemic-era high of 9.1%, but it has since decreased to 3%.
• High inflation is not primarily the fault of either President Joe Biden or former President Donald Trump, according to economists.

Inflation decelerated again in June, bringing further relief to consumers' wallets.

In June 2024, the consumer price index increased by 3% compared to June 2023, despite a 3.3% annual inflation rate in May, according to the Bureau of Labor Statistics.

Although inflation is not yet at policymakers' desired 2% target, it has decreased significantly from its 9% peak two years ago, which was the highest level since 1981.

But why did inflation initially take off?

During the first U.S. presidential debate last month, both candidates, President Joe Biden and former President Donald Trump, accused each other of causing inflation-related complaints during the pandemic period.

Inflation in June 2024: A breakdown in one chart Housing inflation remains stubbornly high despite inflation cooling down More Americans are facing financial difficulties despite inflation decreasing

During the June 27 debate, Trump stated that Biden was responsible for inflation, saying, "He caused the inflation." Trump also added, "I gave him a country with no, essentially no inflation."

Biden argued that inflation was low during Trump's presidency because the economy was struggling.

"He completely destroyed the economy," Biden stated.

But the cause of inflation isn't so black-and-white, economists say.

In recent years, consumers have experienced inflation, but it is not primarily due to the actions of Biden and Trump, according to some.

'Neither Trump nor Biden is to blame'

Higher prices in the U.S. economy were caused by global events beyond the control of Trump or Biden, according to economists.

There were other factors, too.

The Federal Reserve, acting independently from the Oval Office, was slow to act to contain hot inflation, which may have been due to policies such as pandemic relief packages and "greedflation."

David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, stated that the answer is not a straightforward yes or no.

He remarked that presidents often receive more praise and criticism for the economy than is actually warranted.

The perception that Biden is contributing to high inflation can be attributed to optics: He assumed office in early 2021, coinciding with a significant increase in inflation, according to economists.

During Trump's presidency, the U.S. experienced a severe recession due to the Covid-19 pandemic, causing the consumer price index to nearly zero in spring 2020 as unemployment surged and consumers reduced spending.

"Mark Zandi, chief economist at Moody's Analytics, believes that neither Trump nor Biden is responsible for the high inflation. Instead, he believes that the pandemic and the Russian war in Ukraine are to blame."

The big reasons inflation spiked

Mismatched supply and demand are the main causes of high-level inflation.

The pandemic disrupted global supply chains.

Labor shortages occurred due to illnesses that sidelined workers, the closure of child-care centers, concerns about getting sick on the job, and a decline in immigration, which reduced the worker supply, economists stated.

The shutdown of factories in China led to a reduction in the supply of goods, as cargo ships were unable to be unloaded at ports.

Meanwhile, consumers changed their buying patterns.

During the pandemic, Americans shifted their spending habits, purchasing more physical items like living room furniture and home office desks, in contrast to the pre-pandemic norm of spending more on services such as dining out, travel, and entertainment.

The surge in demand, driven by the reopening of the U.S. economy, combined with supply shortages to cause prices to rise.

There were other related factors, too.

While rental car companies sold off their fleets because they didn't think the recession would be short-lived, automakers didn't have enough semiconductor chips necessary to build cars, according to Wessel.

Zandi stated that as Covid cases were reaching new highs before 2022, the conflict in Ukraine intensified inflation by increasing the cost of commodities such as oil and food globally.

The International Monetary Fund reported in October 2022 that global inflation reached a level not seen in several decades.

According to Stephen Brown, deputy chief North America economist for Capital Economics, the high inflation rates in most advanced economies are mainly due to global trends rather than specific policy actions of any government, although they did contribute to some extent.

Big spending bills' impact 'only clear in hindsight'

In the pandemic era, both Biden and Trump approved additional government spending, which economists claimed led to inflation.

The $1.9 trillion American Rescue Plan, signed by Biden in March 2021, provided households with $1,400 stimulus checks, enhanced unemployment benefits, and a larger child tax credit, among other forms of relief.

The strong job market and low unemployment are some of the "good things" that resulted from the policy, according to Michael Strain, director of economic policy studies at the American Enterprise Institute, a right-leaning think tank.

At the time, the magnitude of the U.S. economy was not sufficient to absorb the excess money, which resulted in an increase in prices and stimulated demand, as stated by him.

Strain believes that President Biden shares some blame for the inflation experienced over the past few years.

The American Rescue Plan is estimated to have added approximately 2 percentage points to underlying inflation. Since its peak at 9.1% in June 2022, the consumer price index has decreased to 3%.

The U.S. central bank, the Federal Reserve, seeks a long-term inflation rate of approximately 2%.

"If the American Rescue Plan had not been implemented, the U.S. would still have had inflation, according to Strain. Therefore, it is crucial not to exaggerate the current situation."

Zandi believed that the ARP's inflationary impact was positive and necessary to restore the economy to the Fed's desired inflation rate, which had been below average for an extended period.

Trump approved two stimulus packages, totaling approximately $3 trillion, in March and December 2020.

Wessel stated that the "fiscal policy" measures were a safeguard against a poor economic recovery, possibly due to the U.S.' inadequate response to the Great Recession, which resulted in prolonged high unemployment.

The president acknowledged that the U.S. may have issued too much stimulus, but he clarified that this was only clear in hindsight.

Biden and Trump implemented other policies that could potentially lead to higher prices, according to economists.

Biden largely maintained the tariffs imposed by Trump on imported steel, aluminum, and goods from China, while also imposing new import taxes on Chinese goods such as electric vehicles and solar panels.

The Fed and 'greedflation'

Fed officials also have some responsibility for inflation, economists said.

The central bank manages inflation through interest rate adjustments. Elevating rates increases borrowing expenses for enterprises and individuals, tempering economic growth and subsequently inflation.

In March 2022, the Fed raised interest rates to their highest levels in nearly two decades, following a year of slow action as inflation began to rise.

Strain stated that it waited too long to reduce the bond-buying program, which was intended to stimulate economic activity through "quantitative easing."

"Zandi stated that Fed policy was a mistake, although she believed no one could have predicted the outcome under the given circumstances. However, in hindsight, she realized it was an error."

Some have suggested that corporations may be exploiting the high-inflation environment to increase prices beyond what is necessary, thereby increasing their profits, which some refer to as "greedflation."

Though it may have contributed slightly, economists said it's unlikely that this was a cause of inflation.

If anything like that occurred, it would have been a minor factor in the inflation we experienced, according to Strain. He estimates that the dynamic would have added less than 1 percentage point to the inflation rate.

"Wessel stated that companies often seek to increase prices when possible, and he believes they capitalized on the inflationary environment, but he does not believe they were the cause of it."