The economy met the rule-of-thumb definition of a recession — two consecutive quarters of negative growth — two months ago as the economy shrank at a 1.5% annualized rate in the first quarter and contracted at a 0.9% pace in the second quarter. Yet the Biden administration has repeatedly argued that the economy, which has been plagued by inflationary pressures and persistent supply chain backlogs for the past two years, is stronger than ever.
“The American Rescue Plan took America from an economic crisis to an economic recovery,” Biden said on social media. “And not a single Republican voted for it.”
Biden signed the American Rescue Plan, a $1.9 trillion stimulus package that included $1,400 relief payments for those who met the qualifications and an extension of $300 weekly enhanced federal unemployment insurance, at the outset of his tenure. The legislation was among the largest stimulus packages in American history and followed President Donald Trump’s $2.2 trillion CARES Act.
Evidence that the higher unemployment checks contributed to record-high inflation has continued to mount. While some states allowed residents to continue receiving the benefits through September 2021, others opted out of the program in the interest of fostering a recovery in their labor markets. Economists Harry Holzer, Glenn Hubbard, and Michael Strain noted in a recent paper that the states which prematurely nixed the benefits saw “the flow of unemployed workers into employment increase by around two-thirds.”
Biden, however, still asserts that the American Rescue Plan fostered “a fundamentally different economic vision” that induced a landmark recovery.
“The previous administration lost more jobs on its watch than any administration since Herbert Hoover — that’s a fact — all based on failed trickle-down economics that benefitted the wealthiest Americans and hit the middle class and working people the hardest,” Biden argued during a speech delivered in Ohio two months ago. “We designed the American Rescue Plan based on the belief that a recovery should help all Americans prosper… a plan that led to the most jobs created in the first period of a presidency than any time in all American history.”
Biden has repeatedly claimed that the strong labor market recovery stemmed from his policies — without accounting for the reality that the job growth occurred as the United States is regaining jobs from the lockdown-induced recession rather than creating new jobs from scratch.
Meanwhile, wage inflation has been a salient factor for employers as labor force participation rates fail to recover, with retailers passing additional costs onto consumers. Labor force participation dropped from 66% in 2008 to 63% in 2020, then fell another 3% between February 2020 and April 2020 alone amid government lockdowns and business closures, according to data from the Bureau of Labor Statistics.
Biden has also pinned inflation on corporate price gouging and “Putin’s Price Hike.” As year-over-year inflation reached its highest levels in June, the commander-in-chief falsely claimed that rising price levels are “worse everywhere but here” — though developed nations such as Germany, the United Kingdom, Canada, South Korea, and Japan had been experiencing lower inflation than the United States.