Joe Biden's Economic Legacy

Joe Biden and his administration will soon leave the White House and in this article we will summarize his legacy in economic policy. The Joe Biden administration's economic policies, often referred to as “Bidenomics,” focus on fighting pandemics, investing in infrastructure, strengthening the social safety net, and addressing income inequality. Key measures include the American Bailout Plan, the Infrastructure Investment and Jobs Act, and initiatives to boost green energy, semiconductor manufacturing, and health care subsidies.

The first year saw strong GDP growth, wage increases and job creation, and rising inflation, which peaked at 9% in June 2022 and stabilized at 3% by mid-2024. The unemployment rate remained low, averaging 3.6% between 2022 and 2023, although it rose to 4.3% by mid-2024. The U.S. Federal Reserve responded by aggressively raising interest rates, which are expected to ease in late 2024.

Economic performance in 2021

President Biden has faced serious economic and financial challenges since taking office, with 10 million fewer jobs than in early 2020 and a record $3.1 trillion budget deficit due to the effects of the pandemic. Passed by his administration in March 2021 without Republican support, the American Recovery Plan Act allocated $1.9 trillion in aid, including $1,400 stimulus checks, expanded child tax credits and unemployment benefits. The Infrastructure Investment and Jobs Act, signed into law in November 2021, allocated $1 trillion for infrastructure over a decade with bipartisan Senate approval.

Economic indicators in 2022

Global inflation rose sharply in 2021, peaking in June 2022, and then declined steadily in 2023 and 2024. Despite concerns about inflation, the U.S. labor market remained robust, with the unemployment rate in 2022 at 3.6 percent, the lowest since 1969. By mid-2022, the employment rate had surpassed pre-pandemic records, with monthly job gains averaging 400,000. Strong household finances, bolstered by savings made during the pandemic and an active labor market, contrasted with low consumer sentiment driven by inflation.

The Biden administration has emphasized deficit reduction to dampen inflation. In FY 2022, the budget deficit was reduced by $1.4 trillion, or $1.8 trillion excluding student loan forgiveness. Despite a brief decline in GDP in early 2022, the economy rebounded in the third quarter, surpassing pre-pandemic levels. Fears of a recession persisted but faded as economic indicators showed growth through the end of 2023.

In 2022, Biden signed into law the CHIPS and Science Act and the Inflation Reduction Act. The Federal Reserve actively raised interest rates to combat inflation, predicting higher unemployment in 2023. Meanwhile, the number of uninsured Americans under age 65 fell by 3.2 million between 2020 and mid-2022, reaching record lows in both percentage and absolute terms.

Economic performance in 2023

Predictions of a U.S. recession in 2023 proved wrong: real GDP grew by 2.5%, outpacing all other G7 countries. During President Biden's first three years in office, average annual GDP growth reached a high 3.4%. The labor market remained strong, with the unemployment rate at 3.6% for the second year in a row, a level not seen since 1969. Employment continued to set monthly records, with 3 million new jobs created in 2023, an average of 251,000 jobs per month.

The federal budget deficit grew by $319 billion to $1.7 trillion (6.3% of GDP) in FY 2023, in part due to slowing revenue growth. Amid Republican threats to block an increase in the national debt ceiling, President Biden signed the Fiscal Responsibility Act of 2023, which averted default by imposing a spending cap, new work requirements for food assistance, and simplifying the approval process for infrastructure projects.

Economic performance in 2024

By November 2024, the U.S. labor market continued to set employment records, with 159.3 million people employed, about 7 million more than before the pandemic reached in June 2022. The unemployment rate rose from 3.7% in January to 4.2% in November, indicating a slight cooling of the labor market. Real hourly wages rose from $30.29 in January to $30.57 in November, one of the highest inflation-adjusted rates since 1964, maintaining strong purchasing power despite earlier inflationary pressures.

The stock market has also risen, with the S&P 500 Index up 29% from December 2023 through November 2024, based on monthly averages. President Biden's administration, based on November data, had the lowest average unemployment rate (4.12%) and the highest real wages for manufacturing and non-manufacturing workers ($30.11) of any president since 1964.

On the fiscal side, the federal debt reached $34.4 trillion in early 2024, rising rapidly in two 100-day periods since mid-2023. Despite this, the debt-to-GDP ratio fell from 97.1% in Q1 2021 to 95.2% in Q2 2024 as economic growth outpaced debt accumulation.

Conclusion

Joe Biden's economic legacy reflects significant accomplishments in the economic recovery from the pandemic crisis. His policies contributed to record levels of employment, sustained growth in real wages, and positive changes in household financial conditions. However, his presidency has also been accompanied by rising public debt and inflationary challenges. Biden demonstrated decisiveness in pursuing antitrust policies, which may have been an important step in combating market monopolies and increasing competition. Overall, Biden's economic legacy appears multifaceted and will continue to influence the U.S. economy in the long term.