As President Biden prepares to depart the White House, he leaves an economic legacy marked by a historic pandemic that paralyzed consumers and businesses across the U.S.
After inheriting a COVID-scarred nation in 2021, Mr. Biden focused on righting the economy, a strategy that economists told CBS MoneyWatch is visible in the country’s solid GDP growth and low unemployment. By several key measures, the economy is stronger than it was four years ago: The jobless rate is near a 50-year low, wages are growing and the U.S. managed to sidestep a recession widely expected by many on Wall Street as the Federal Reserve moved to curb inflation by ratcheting up interest rates.
“He should have a strong legacy when it comes to the economy,” Mark Zandi, chief economist of Moody’s Analytics, said of Mr. Biden. “He inherited an economy that was flat on its back because of the COVID pandemic, and he’s leaving an economy that’s flying high, at least in the aggregate,”
Zandi added, “How much he can take credit for that, it’s a reasonable debate, but I think he deserves a lot of credit.”
Zandi pointed to several pieces of landmark legislation passed under Biden, including the $1.9 trillion American Rescue Plan Act, or ARPA, as helping to stabilize the nation and produce growth that has surpassed most other major economies around the world.
Biden also score some wins on health care, such as a new $2,000 out-of-pocket spending cap on prescriptions for Medicare enrollees and a $35 cap on insulin prices.
Yet in retrospect, he added, additional trillions in federal stimulus may have played a part in the soaring inflation of the last few years, which Zandi said was also fueled by the economic impact of Russia’s invasion of Ukraine.
ARPA “was very controversial, but at the end of the day it got the economy back to full employment,” Zandi said.
Deep structural problems
Although Biden’s policies were key in helping the economy recover from the pandemic, millions of Americans continue to struggle with a cost-of-living crisis worsened by the hottest inflation in four decades. Long-term challenges in housing affordability only deepened during the Biden administration, while U.S. wealth inequality today remains near record levels.
To be sure, health care, child care and education costs have outpaced inflation for years, weighing on millions households and making many families vulnerable to even minor downturns. But the inflation spike in 2022 intensified these existing financial pains, said Lindsay Owens, executive director of the Groundwork Collaborative, a progressive economic think tank.
“The American economy for a long time has been characterized by a lack of affordability for the biggest ticket items,” Owens said. “Housing has been out of reach, health care has been expensive, child care is expensive — that was all true before Biden.”
Meanwhile, a Biden plan to sweep away student loan debt was largely shot down by the courts, although the Department of Education used other means to offer relief to millions of borrowers. Housing costs continued to soar under Biden due to rising home values as well as soaring mortgage rates after the Federal Reserve hiked interest rates to battle inflation.
The upshot: Under Biden, many households remained dogged by the same long-term pocketbook issues that have prevailed for decades under previous presidential administrations. During the pandemic, the soaring cost of essentials like food, fuel and rent only deepened the country’s widespread precarity — a gnawing sense of financial insecurity that has left tens of millions of Americans vulnerable to job losses, medical problems and even modest economic dips.
Ballooning debt
Biden’s legislative wins — ARPA and the Infrastructure Investment and Jobs Act in 2021, and the Inflation Reduction Act and the CHIPS Act in 2022 — added trillions in additional federal spending. The idea underlying these efforts was to rejuvenate the U.S. economy by investing in key sectors, such as by building semiconductor chip plants, rebuilding U.S. roads or accelerating the shift toward green energy.
But those efforts will likely take years to pay off, economists note. In the meantime, the nation’s debt has ballooned to a record $36.2 trillion as of mid-January due to a combination of fiscal stimulus authorized by both Biden and Trump, as well as Trump’s 2017 tax cuts.
With federal spending outpacing revenues, the nation will face tough choices, such as whether to raise taxes, cut federal programs or both. Asked to describe Biden’s economic legacy, Cato Institute vice president of general economics Scott Lincicome summarized it in one word: “Frustrating.”
“If you could look at the basic fundamentals — economic growth, jobs — things have been pretty good,” Lincicome, who describes himself as a “libertarian free marketer,” added. “But if you look beneath the hood, there are some rather significant problems.”
Chief among them are the nation’s spiraling debt, Lincicome said. Treasury yields have been rising ahead of Trump’s inauguration on Monday, partly due to concerns that the U.S. could struggle in coming years to service its debt.
“In terms of what Trump inherits — and it’s not just Biden’s fault, Trump did a lot of COVID spending, too — but we’re now at a point where you can see bond markets are chirping, and you can see inflation has remained stubbornly higher than we would have hoped,” Lincicome noted. “The [Congressional Budget Office] and a lot of other folks agree that the debt is a pretty pressing issue.”
Trump’s economy on Jan. 20
Despite such concerns, the economists interviewed by CBS MoneyWatch say that Trump will inherit a relatively strong economy when he’s inaugurated. Not surprising, then, that Zandi and Lincicome had the same advice for the Trump administration in how it handles the U.S. economy: “Do no harm.”
“The best thing Trump could do is do nothing,” Zandi said. “Biden got a basket case economy and he’s bequeathing an economy that is operating at full tilt.”
For his part, Trump has signaled his intent to reshape the economy through a combination of steeper tariffs, deeper tax cuts, fewer federal regulations and mass deportations of undocumented immigrants.
“Joe Biden’s legacy is marred by crippling inflation, a migrant crime invasion and American weakness on the world stage,” Trump-Vance Transition Spokesperson Anna Kelly said in a statement to CBS MoneyWatch. “Thankfully, in just five days, President Trump will usher in a new Golden Age of American success and carry out his mandate to make America wealthy, safe, strong and great again.”
Economists view some of Trump’s stated plans as potentially inflationary, although some question whether the president-elect will follow through with all of them, such as a broad-based tariff on all imports.
“We expect tariffs on imports from China and autos, but not a universal tariff, which would carry economic and political risks that we think the White House will prefer to avoid,” Goldman Sachs analysts wrote in a December research note.
At the same time, the Trump administration wants to extend his 2017 Tax Cuts & Jobs Act (TCJA), an effort the nonpartisan Congressional Budget Office has projected could add $4.6 trillion to the federal deficit over the next decade. Trump has vowed that his tariffs would raise enough money to cover the tax cuts, a proposition that economists assess as unlikely.
Tariffs could raise “a few hundred billion, maybe, but that’s total, and you’re still in a massive hole,” Lincicome noted.
American oligarchs
Extending the tax cuts would also likely favor the nation’s wealthiest households, given that the TCJA cut taxes for top earners far more than for low- or middle-income Americans. During the past four years, America’s richest people have seen their wealth soar, with Elon Musk — the world’s richest person and a close adviser and backer of Trump — now worth $450 billion, more than double his $175 billion net worth when Biden was inaugurated in 2021, according to the Bloomberg Billionaires Index.
In his farewell message on Wednesday, Biden warned that the growing concentration of wealth in the U.S. poses a serious risk to the nation.
Today, an oligarchy is taking shape in America of extreme wealth, power and influence that literally threatens our entire democracy, our basic rights and freedoms and a fair shot for everyone to get ahead,” Biden said.
That’s unlikely to change under Trump, economists predicted “The big story of American inequality is a simple one: It’s the takeoff in top incomes,” Owens noted.
She believes that “Until we tax the top, we will have runaway income inequality.”
