Biden and the Dems Cut the Debt by $1 Trillion Since Last Year
The headline the deficit-obsessed media won't write- or highlight other upsides of inflation
Here’s a core reality. Debtors do well during bouts of inflation since the money they owe becomes cheaper.
And there is no larger debtor than the federal government, so it’s unsurprising that inflation has been beneficial in helping lower the debt burden on taxpayers.
This year the federal debt fell to $30.824 trillion
That is from the all-time high debt, adjusting for inflation, of $31.89 trillion in 2021 in the wake of the costs of the pandemic and Trump’s massive unfunded tax cuts for the wealthy.
That translates to Biden cutting the debt by over $1 trillion in a year.
Biden reducing the federal debt more in a single year than any President in history should be a major headline, whatever caveats the media might want to add.
You can see how the rise and now fall of the debt looks over the last ten years in the graph below. (Data from here adjusted using the BLS’s inflation calculator.)
Inflation does create serious challenges for many families but it also helps both governments and individuals who are heavily in debt. And despite the media beating the drums of how terrible the economy is currently, the last few years have seen a reduction in wage inequality and lower-income workers getting wage increases higher than inflation, as economist Arindrafit Dube details.
That upper-income professionals in the media focus only on the negative no doubt reflects their social circles not doing as well as those low-wage workers - or having a lot of investments rather than debt. But the media should be reflecting the whole diversity of family situations and discussing the positive and the negative impacts of inflation on families.
One historical note on Biden’s accomplishment. While Biden cut the debt by the largest total dollar amount, the highest percentage reduction in the debt came under Harry Truman in reducing the massive debt leftover from World War II.
How did he do it? A large part of paying off World War II debt was also massive inflation, with 8.5% inflation in 1946, 14.4% inflation in 1947 and 7.7% inflation in 1948.
Despite high inflation in those years, that was also a period that helped launch the largest wage gains for workers in U.S. history, as this article published by the St. Louis Federal Reserve details.
No one thinks of the immediate post-war period as an economic hellscape, but it’s worth remembering it was launched amidst multiple years of massive inflation.
That period of high-wage growth and high inflation is largely forgotten because people are obsessed with the 1970s, which saw a period of lost wages amidst high inflation. But the difference is that the 1970s was also a new era of austerity and union busting imposed on working families, so the results were quite different for most households.
The question is whether the Powell Federal Reserve has learned the wrong lessons from the 1970s, including a mania for imposing austerity economics, while forgetting the lessons of the 1940s when high inflation coexisted with high wage growth and big gains in debt reduction by the federal government.
Again, there are serious problems for families from inflation that deserve a focus by the media. But we also need a far better balance of discussion on gains in the current inflationary economy- and celebrating Biden’s accomplishment in slashing the debt might be one place for the media to start.