While prices are going up, people’s savings are shrinking. Their savings accounts are earning interest rates of less than 1%, which fails to keep pace with an inflation rate of over 8%. Effectively, people’s savings accounts are losing over 7% of their value each year.
This reflected a weak economy: the U.S. economy shrank at a rate of 1.4% in the most recent quarter, reflecting a huge rise in America’s trade deficit. American exports decreased by 9.6%, while imports grew by 17.7%. U.S. productivity dropped at a 7.5% annual rate, the most since 1947.
Inflation is higher in America than it is in Europe. Under Trump, the U.S. economy outperformed Europe, especially during the pandemic year of 2020, when Britain, France and Italy experienced much sharper economic declines than the U.S. The U.S. economy shrank 3.5% in 2020. The economy shrank much more in Europe: 7.9% in France, 9.9% in the United Kingdom, and 8.9% in Italy.
But that has changed under Biden. While America’s economy was shrinking recently, France’s economy was growing in 2022, and France’s inflation rate is lower than America’s. A finance professor describes the current era in the U.S. as “The Biden stagflation,” combining high inflation with economic stagnation.Biden’s policies caused inflation, according to even Democratic economists like Larry Summers and Obama advisor Steven Rattner. As Rattner noted in the New York Times, Biden has spent “an unprecedented amount” of taxpayer money, which resulted in “too much money chasing too few goods.”
To deal with the high inflation of the Biden era, Senator Majority Leader Charles Schumer (D-NY) suggested a tax increase. But raising taxes would also likely shrink the economy and deepen the coming recession that many economists predict.
The economy is already hampered by Biden Administration policies that discourage work, reward idleness, and make it harder for companies to attract employees. Biden enacted policies that reduced the size of America’s private-sector workforce and made America less economically competitive.