Biden challenges Trump to surpass his economic achievements

At the elections, Joe Biden’s economy had no one to defend it. During his term as president, economic growth has been the envy of the developed world, the unemployment rate has been the lowest in half a century, and job creation records have been broken. Donald Trump, however, was highly skilled at capitalizing on the discontent of the working class with the highest inflation in four decades ― even though it was a global phenomenon. And Kamala Harris, in her attempt to distance herself from Biden, barely showed off these economic achievements in her failed campaign. So before passing the baton, the president has decided to be the one to claim his own economic successes. On Tuesday he did so in a defiant speech, albeit with a hint of melancholy, in which he challenged Trump to outperform his economic record.

Biden noted that Republican President Ronald Reagan often insisted that facts are stubborn. “Here are the facts, a set of benchmarks by which we must measure the success and failure of our next four years. During my presidency, we created 16 million new jobs in the United States [...] Will economic growth be stronger or weaker under the next president?” he argued, before addressing the weak point of his achievements.

“The entire world faced a spike in inflation due to disruptions from the pandemic, Putin’s war in Ukraine and supply chain disruptions,” he said, before stressing that he is leaving office with the rate close to 2%. “Where will inflation be at the end [of the next president’s term]?” he asked.

Even though Biden insisted that these were “not political or rhetorical opinions, they’re just facts,” his choice of figures imposed a very subjective filter. The fact that Americans are unhappy with the state of the economy is due to the fact that prices have risen by more than 20% during his four years in office. Inflation reached 9.1% in June 2022, its highest level in four decades. This forced the Federal Reserve to react with the most aggressive rate hikes since the 1980s, which in turn has made home purchases more expensive.

The best defender of the U.S. economic boom in recent months has been the chairman of the Federal Reserve, Jerome Powell. “I feel very good about the state of the economy and monetary policy,” he said last week. He has repeatedly insisted that the world’s largest economy is in good shape, even if inflation is still struggling to reach the 2% target. But Powell himself acknowledged that it will take a few years of gains in purchasing power and controlled inflation for the wounds opened by rising prices to heal.

“An economic disaster”

The world’s largest economy will grow by 2.8% this year, according to the International Monetary Fund (IMF), more than three times that of the eurozone, and by 2.2% next year, almost double, with consumption and non-residential investment as the main drivers. The resilience of consumption is derived from job creation, wage increases and the wealth effect of a stock market at historic highs. The IMF, however, warned in hypothetical scenarios of the drag on growth that a tariff war (such as the one Trump may unleash) would represent. The IMF calculates that it would have a negative impact of 0.4 points in 2025 and 0.6 points in 2026. The effect would be somewhat cushioned by the extension of tax cuts, but would be even greater with strong restrictions on immigration (also advocated by Trump), which would subtract 0.5 points from GDP and add two-tenths to inflation in 2025.

There is uncertainty about whether Trump will follow through on his promises, but they could cause the Federal Reserve to hit the brakes on its rate-cutting cycle. Still, Powell has said he is in favor of waiting to see what measures are approved before evaluating them.

In his speech at the Brookings Institution on Tuesday, Biden began by saying that the Trump administration will inherit a “fairly strong economy.” He concluded his remarks by predicting massive deficits and cuts to federal education, health care and entitlement programs if Trump implements his tax cuts and heads toward what he calls “trickle-down economics” — benefiting the wealthy and corporations with tax cuts, in the hope that it will trickle down — and an overly protectionist trade policy. “He seems determined to impose steep, universal tariffs on all important goods brought into this country on the mistaken belief that foreign countries will bear the cost of those tariffs, rather than the American consumer,” he said. “I pray to God the president-elect throws away Project 2025 [the conservatives’ ultimate program]. I think it would be an economic disaster.”

Although inflation is what has cost the Democrats victory at the polls, the main economic problem facing the United States is its public finances. The projected deficit is the highest of any developed country (between 6% and 7% of gross domestic product) and debt is growing unsustainably. Without drastic measures in areas such as health and social security, there is not much leeway to clean up the fiscal situation on the spending side. On the revenue side, the United States would have room to collect more, but what Trump has promised is not only to extend the tax cuts already in force, but also new tax reductions for various groups.

Although the main theme of Biden’s speech on Tuesday was the economy, there was also a reference towards the end to foreign policy and to defending the role that the United States has played during his term. “If we don’t lead the world, who will?” he asked.

Sign up for our weekly newsletter to get more English-language news coverage from EL PAÍS USA Edition