Elephant on a donkey. What economy Joe Biden inherited Trump

The approval rating of US President Donald Trump after the first month of the rule decreased slightly. Americans are worried that his actions will harm the economy (perhaps they should have been here even before the election to listen to Nobel laureates in the economy, who warned that the arrival of Trump will lead to problems). The current president shifts responsibility to his predecessor, and while Republicans call “baydenomics” a scar on the U.S. economic face, in reality Trump received the country with record good key indicators and without a recession, the beginning of which in 2023 was predicted by Wall Street every second analyst. Interestingly, statistics show, the Democratic Party, contrary to a common belief, brings more benefits to the US economy than the Republican rule.

During the month of the presidency, Trump did not fulfill any of the many promises and, as the Reuters/Ipsos survey showed, he lost in the rating. Its activities by the end of February were approved by 44% of respondents instead of 47% at the time of inauguration. The share of Americans who disapprove of the president rose from 41% to 51%. More and more U.S. residents are concerned about the state of the economy, which may be harmed by increased tariffs. The majority (53%) believes that the economy is moving in the wrong direction – at the end of January there were 43%.

53% of Americans believe that the economy is moving in the wrong direction, a month ago there were 43%

At the same time, it was the hopes for rapid economic growth and more useful solutions that provided Trump’s support from entrepreneurs. The entire election campaign accused Joe Biden of boosting inflation. But in the end, after the inauguration of the new president in January, the growth of consumer prices was the highest in the last year and a half. And then expectations are only worse: the US predicts an acceleration of inflation after Trump’s statements about raising tariffs on imports from China, Mexico and Canada.
The economic results of Biden’s presidency: GDP, stock market and labor market are growing

Having received a country with all pandemic problems and declining real GDP in 2021, Joe Biden focused on economic recovery. So by the time the management had to be transferred to Trump, real GDP grew by 3% (data for the third quarter of 2024, in the fourth growth was 2%).

Throughout Biden’s rule, economic growth exceeded expectations: in 2023, and in 2024, the actual GDP growth was higher than forecasts. In 2023, real GDP growth was the highest among the G7 countries, and, according to preliminary estimates, will be this by the end of 2024, exceeding the EU average by three times. In terms of growth, the United States has overtaken other large economies.

The real GDP under Biden was ahead of the potential – theoretical total volume of production in the economy with the most efficient use of resources. This phenomenon, known as a positive GDP gap, shows that the economy has worked as part of its capabilities because of the high demand from consumers whose incomes have grown regularly.

The dynamic labor market and the rapid growth in the number of new enterprises have allowed to reverse sluggish productivity. She not only returned to the pre-pandemic level, but also significantly ahead of him. This is despite the fact that in the world economy there is a decline in labor productivity – for example, in the European Union, Great Britain and ЯпонииJapan. The McKinsey Institute estimates that maintaining a high productivity growth over a decade could increase total income by $15,000 per family.
Productivity and employment growth

The labor market shows outstanding dynamics even for such growth of production. The number of jobs increased for 48 consecutive months (up to December 2024) is the second record for the entire history of observations. Biden became the first president in U.S. history to increase the number of jobs a year.

Biden became the first U.S. president to increase their jobs

Partly affected recovery after the pandemic. At the beginning of 2022, the United States lost almost 22 million jobs, but virtually new ones began to appear, so in June of the same year the number of jobs exceeded the pre-pandemic level. Since then, more than 7 million new jobs have appeared in the economy – this is almost 240 thousand per month. Despite the fact that since 1939, the average increase in jobs was about 125 thousand per month.

Biden achieved such success, including through a soft immigration policy. The increase in immigration has contributed to productivity and mitigated the structural decline in the number of American workers caused by low birth rates and population ageing.

As jobs increase, the unemployment rate reached a nearly 54-year low of 3.4% in January 2023 (and overall for 27 months of Biden’s reign, the unemployment rate was below 4%, this has not been seen since the time of Lyndon Johnson). In fairness, the previous minimum — 3.5% — was reached by the Trump administration, but the radical anti-immigration policy did not consolidate the success, so by the beginning of Biden’s reign, the unemployment rate was 6.8%. Trump at the beginning of the second term, the unemployment rate was 4.1%.

A strong economy and a boom in the labor market have led to a significant increase in household well-being. High inflation ate a tangible part of the income of the population until 2022. However, at the time of the transfer of power to Trump, the growth rate of income adjusted for inflation and after taxes resumption returned to the previous trend and is growing at a stable pace. Household financial security has also improved by lowering their debt burden. The ratio of total household debt to after-tax income decreased from June 2022 to June 2024.
The stock market is in the plus

The new Trump administration has inherited an unusually strong stock market, despite the stereotype that it shows poor results under Democrats. The stock market is often used as a barometer of the economy, and its performance during the presidential term may indicate its success or failure. Last year, the US stock market index S&P 500 rose by more than 25% – one and a half times faster than a year before taking the position of Biden.

Trump, contrary to stereotypes, inherited from the Democrats unusually strong stock market

While Biden was president, U.S. stock indices showed significant growth, even adjusted for inflation, regularly reached new heights, increasing pension accounts and providing high return to investors. Since Biden’s inauguration on January 20, 2021 to January 16, 2025, the total yield of the S&P 500 (including dividends) was 66%. Over the past two years of Biden’s presidency, the S&P 500 index for the first time since the late 1990s has shown an annual increase of more than 20%.
Problems: inflation and public debt

The baseline indicators – economic growth, jobs – look good, but high inflation has become a spoonful of tar. In June 2022, it reached 9.1% – the highest figure since the early 1980s, that is, an entire generation of Americans has not seen such a high rate before. Trump blames Biden’s policy.

“President Biden has completely lost control of what is happening in our country, in particular with our highly inflation economy and at our border,” he said at the World Economic Forum in Davos. It was probably the highest inflation in the history of our country. That is why since taking office, I have taken swift action to reverse each of these radical leftists who created this scourge — in particular with regard to immigration, crime and inflation.”

According to Trump, President Biden completely lost control of the country

Experts agree that it is unfair to blame for the price increase solely on the Biden administration. First, inflation was influenced by large-scale fiscal packages adopted under Trump during the pandemic (which, however, Biden later supplemented). And secondly, this surge was global, and the United States was among most developed countries that faced the dispersal of inflation after the pandemic. The peak of growth fell in the middle of 2022, after which the slowdown began.

The rise in prices hit Americans hard, especially those who live from paycheck to paycheck. Even when inflation managed to curb, and real incomes began to grow again at a pre-pandemic pace, the rise in price only slowed down, but did not reverse. Therefore, the perception of the Americans of the economy continued to deteriorate. This is the state of the economy, when everything is fine on paper, and the mood of consumers still lame, called «вайбцессия»“vaibcession”.

Nevertheless, Trump got the economy with moderate inflation of 2.7% year-on-year. The first Trump administration inherited inflation of 1.8% and the Biden administration at 1.2%.

Biden’s initiatives that look like achievements on the surface—the American Rescue Plan (ARPA) and the Infrastructure and Jobs Act, and the Inflation Reduction Act and the Semiconductor Act and the ChIPS Act, have largely achieved their goals, though they added trillions of dollars of additional federal spending. Their idea was to improve the U.S. economy by attracting investment in key sectors such as building semiconductor chip plants, restoring roads to the U.S. or accelerating the transition to green energy.

But these efforts are likely to take годыyears to pay off. Meanwhile, the country’s public debt by mid-January reached a record level of $ 36.2 trillion due to the combined impact of the fiscal stimulus initiated by both Biden and Trump, as well as the tax cuts adopted in 2017 under Trump, and apparently new cuts that Trump will impose during his second term. In the future, the country will have to take difficult measures, such as tax increases, reducing federal programs or combining these measures.

Prior to Trump’s inauguration, Treasury bond yields began to rise, in part because of fears that in the coming years the U.S. could face difficulties in debt servicing. Once the level of public debt grows to high values, investors begin to question the country’s ability to timely service their obligations. Although the likelihood of default on American bonds is extremely low, an increase in debt formally increases the perception of risk. To compensate for this risk, investors require a higher return. It’s not just Biden’s fault, Trump has also spent a lot on COVID fights, but now bond markets are starting to signal alarms.

Despite such fears, the consensus among economists is that Trump has inherited an extremely strong economy. It is not surprising that the most common advice to Trump, which can be heard from economists 1(1, 22, 33, 44), revolve around the principle of “no harm”.

Economists unanimously advise Trump: “Don’t hurt”

Democrats are more likely to be better for the economy

For several decades, the Republican Party has been positioning itself as more competent in economic matters – it does not interfere with investors, reduces bureaucracy and taxes. Democrats, according to this logic, are accused of increasing state participation, social spending, for which business is paid. Not so long ago, environmental protection was added to this, which also increases the costs of many companies.

However, economists’ calculations say that in fact, more successful economic rule of Republicans is a myth that is not backed by real statistics. “The superiority of economic performance under the Democrats over Republicans is almost everywhere,” Princeton University scholars Alan Blinder and Mark Watson concluded in 2013.

Under the Democratic presidents, the average annual GDP growth, according to their calculations, was 3.26%, while with Republicans – 2.75%. Under Democratic presidents, the U.S. post-war economy produced nearly three times the growth of jobs than Republicans. Under the Democrats, the average unemployment rate was 5.52%, while with Republicans – 6.33%.It is believed that Jimmy Carter was an economic loser due to sky-high inflation and insolvent interest rates, writes a lawyer for Brand Law Group in Washington, Jeremy Glover. But Carter inherited a country with stagflation and sought to defeat it, which was partly successful – he achieved a high growth in investment. Ten of the last 11 recessions began with Republican administrations, and ended with the Democrats, he notes. In the years after World War II, the United States spent 113 months in recession, 102 of which were under the Republican president.

Democratic presidents create twice as many jobs a year as Republican presidents. The total number of jobs created at the first is 77 million, according to Glover’s calculations, which he has been in the wake of the Second World War, while Republican presidents – only 33 million. If you look at the average annual rate, the Democrats also have an advantage (2 million compared to 828 thousand).

Such calculations do not take into account the party affiliation of the majority in Congress, which makes a distortion in the picture. In addition, the reasons for this good luck of the Democratic presidents are not clear to economists. There is no indication that the advantage of the Democrats can be explained by the best monetary and fiscal policy, notes Nobel laureate Paul Krugman. “Democrats on average seem to be more fortunate than Republicans in terms of oil prices and technological progress.”