Ollie Corfe
01 October 2024 11:00am
Life in America is more expensive than ever.
“Food, rent, gas, back-to-school clothes, prescription medications. After all that, for many families, there’s not much left at the end of the month.”
That’s not a Republican attack line on the Biden administration’s handling of the cost of living crisis – that’s Democratic nominee Kamala Harris on the stump back in August, promising to turn things around.
Joe Biden’s economic record is strong. He is able to boast record job creation and sustained GDP growth (albeit largely thanks to the near-inevitable pandemic recovery).
But such macro-level success is unlikely to hit home for regular Americans. A family of four now has to spend roughly $2,500 a year more on groceries than when the president took office. House prices have gone up by nearly a quarter.
These acute strains on the household purse have not been offset by earnings growth. Real-terms weekly wages are down 2.1 per cent.
Ms Harris’s running mate, Tim Walz, recently claimed people “can’t afford four more years of this”, in an apparent gaffe. But the numbers certainly stand up his point.
Inflation
Spiking oil and gas prices in 2021, which were then exacerbated by Russia’s invasion of Ukraine in early 2022, pushed inflation up around the world.
The US was not spared: the consumer price index peaked at 9.1 per cent in July 2022, according to the US Bureau of Labor Statistics (BLS). Its rise was notably earlier and faster than in Western peer nations.
A chorus of experts, pointing to basic economic theory, pinned this on the freshly elected President Biden’s March 2021 $1.9 trillion American Rescue Plan, designed to shake off the effects of the pandemic for good.
The combination of this, and the Federal Reserve’s initial reluctance to raise interest rates, wreaked havoc on personal budgets.
The United States Department of Agriculture estimated a typical family – consisting of two adults and two children with “moderate” spending habits – forked out $314 a week on food, or $1,361 a month, in August.
The month of Mr Biden’s inauguration, the same household would have spent just $1,147 a month. That’s an 18.8 per cent increase over his term so far, working out to an extra $2,500 a year – about the cost of a round-the-world trip from New York’s JFK airport.
Economy
Total expenditure for all family units was $63,036 in 2019, the last year of the Trump presidency unaffected by Covid-19. By 2023 this had swollen 22.6 per cent to $77,280, according to the BLS.
The share going towards groceries expanded only slightly, from 13.3 per cent to 13.6 per cent. This is chiefly because the costs have gone up across the board – only the proportion devoted to entertainment, apparel and other miscellaneous items fell substantially.
Energy prices were 37.7 per cent higher in August than they were in January 2021. This affects housing and transportation costs alike. Americans drive 13,476 miles a year on average, according to the Federal Highway Administration – roughly twice as much as Europeans.
Inflation aside, Mr Biden’s whopping stimulus package did deliver a booming economy and thriving labour market.
Federal Reserve Economic Data (FRED) show US GDP has grown by 30.1 per cent since Biden took office, up from $22 trillion in the fourth quarter of 2020 to $28.7 trillion in the second of 2024. The growth figure for Trump’s tenure – notably beset by the pandemic – is just 15.4 per cent.
New jobs have been key – a larger workforce produces more goods and services. A net employment gain of 15.9 million under Mr Biden was already a record with six months left on the clock of his presidency. This compares with net losses of 2.7 million under his predecessor.
Debate rages over whether the US has truly seen job “creation”. Critics have pointed out that many postings were simply picked back up as the country emerged from the pandemic. Excluding the Covid-19 surge, the unemployment rate averaged around 4 per cent for both presidents.
On the other hand, inflation-adjusted median earnings rose by 7.7 per cent under the Republican’s stewardship of the economy. Biden has seen them fall by 2.1 per cent so far.
Housing
When combined with a red hot property market and decade-high mortgage rates, lighter pay packets have had disastrous consequences for the affordability of housing.
The Federal Reserve Bank of Atlanta measures the ability of a median-income family to absorb the costs associated with owning a median-priced home on a regular basis.
As of June, their Home Ownership Affordability Monitor Index indicated affordability had plummeted 35.5 per cent since Mr Biden took office while Trump saw the metric tick up by 4.2 per cent. Only for the first three months of his presidency did they deem housing nationally to be affordable,
The cost of housing is largely responsible for this, shooting up by 16.1 per cent under Mr Biden, surpassing the 13.4 per cent rise under his predecessor, according to the FRED.
At $412,000 on average, a typical American home is now about $100,000 more expensive today than it was at the start of the Trump presidency ($313,000), some $57,000 of that rise coming under the Democrat’s watch.
Debt
Lines of credit are being woven into safety nets as a result, despite being an increasingly unattractive option. US household debt hit a record $17.8 trillion in the second quarter of this year – of which $12.5 trillion, or just over 70 per cent of the total, consisted of mortgages.
This worked out to $104,215 per household in 2023 – having crossed the six-figure threshold the previous year for the first time since the financial crisis. This is a burden up 8.1 per cent from $96,371 the year Mr Biden took office, according to Experian.
Credit card debt soared 25.4 per cent over the same period, and now stands at $6,501 on average for all consumers with a credit rating. Not only are people maxing out their cards, but with the interest charged hovering around a 30-year high of 22 per cent, the debt incurred is compounding at an ever faster rate.
The $1.6 trillion pile of student debt stands alone in not having gone up by double-digits this presidency – primarily because of the Biden administration’s forgiving of some $153 billion in loans for some 4.3 million graduates.
Yet the Committee for a Responsible Federal Budget claimed Mr Biden’s cancellation policies – implemented via Executive Order, without congressional approval – cost the government more than all federal spending on higher education over the nation’s entire history.
Such largesse helped nudge the US national debt to $34.8 trillion in Q2 2024, its highest amount on record.
International observers are taking note, with a high debt-to-GDP ratio a tell-tale sign of coming insolvency. The US’s came to 123.3 per cent in April of this year. The International Monetary Fund estimates the comparable figure for France was 111.6, the UK 104.3 and China 88.6 per cent.
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