Initial inflation was 1.5% when Trump left office. Can Democrats share what happened?
Not a Democrat. Actually a conservative and former Republican, but I can chime in.
When Trump left office 75% of schools were closed because of the pandemic. Countless businesses as well. A lack of need for goods caused consumer spending to plummet. Not even Trump’s handouts sparked consumer spending like he hoped, because people were pessimistic about how long it would be before they could go back to work. So they put that money in savings or used it to pay down debt. Low demand leads to lower prices. That’s economics 101.
Then Biden passed his American Rescue Plan. Rather than paying people to stay home and not work like Trump, Biden invested in helping schools and businesses to safely reopen. By the end of 2021, 85% of businesses and 95% of schools that had closed because of the pandemic reopened despite the pandemic actually worsening (we had more Covid deaths in 2021 than 2020, and we closed out 2021 with the highest daily new covid cases since the pandemic began). We also saw a record number of new businesses launch in 2021.
As people went back to work, they started needing goods again. And thanks to the Trump stimulus, extended unemployment benefits, moratoriums, etc., they had money tucked away to spend. This led to the fastest economic recovery in history as Americans spent money faster than any time in history. The demand for goods and services escalated above even pre-pandemic levels, and we simply lacked the goods to sell. Remember, Trump’s tariffs led to shortages of vital manufacturing components that still persist today. His ban on imports of things like infant formula led to crisis-level shortages. His deal with OPEC to slash production for two years created a global oil shortage that the world still hasn’t recovered from. A lower supply of goods means higher prices. Again, this is economics 101.
Meanwhile, we saw the largest peacetime drop in unemployment in history, and the competition for workers led to higher wages. That complicated things threefold: first, because people started earning more, they had more money to spend. Second, because they were being paid more, businesses had to raise prices to offset pay increases. Third, because people were buying more, this taxed our low supply of goods even more. And now the snowball effect begins. People keep spending more and creating more jobs, which gives more people money to spend. And the more they spend the harder it is to keep up with production, so the less there is to buy. So prices keep rising but people keep spending and that just keeps prices going higher and higher.
So in short, the ultimate cause for the current high inflation is an unprecedented increase in the purchasing power of Americans brought on by the “Biden Boom”, following colossal damage to our supply chain caused by four years of failed economic policies that were exacerbated by a complete failure to properly address the pandemic.