Are Biden And Trudeau Responsible For Inflation And High Prices?

Most of us have heard the term “It’s the economy, stupid!”. It actually comes from a handmade sign that Bill Clinton’s campaign strategist James Carville had in his office in 1992 US election. The majority of federal elections in Western democracies are mostly about the economy in some way.

Interestingly, Carville had three points on his sign:

  1. Change vs. more of the same.
  2. The economy, stupid.
  3. Don’t forget health care

These three points are still the core of federal politics in the US and Canada today – though immigration, foreign policy, and public confidence in leaders and candidates are also key issues.

Both Canada and the US will have elections within the next 18 months, and the incumbent leaders in each nation, Justin Trudeau and Joe Biden, are extremely unpopular. Perhaps the only advantage both have is that their opponents (Pierre Poilievre and Donald Trump) are themselves unpopular.

What is odd is that in both countries, both inflation and unemployment are low compared to previous decades – low unemployment is particularly remarkable given how it rocketed up during the pandemic.

Perhaps the closest parallel to the 2020-2024 period was the period of 1945-1949 immediately after WW2. Both periods had huge cultural shifts as things returned to a new normal, along with high unemployment followed by high inflation and scarcity of consumer goods such as new cars. Both periods were also characterized by major problems with housing shortages and unaffordability.

Economists such as Paul Krugman lament that inflation is actually low and the US economy is doing great, and argue that the public’s perceptions of the economy are skewed. In the hyper-partisan political atmosphere of the US, Krugman and others maintain that polling shows people tend to view the economy through a partisan lens. They are more forgiving when the president of their preferred party is in power, and view the economy as far worse than it really is when the opposing party controls the presidency.

No doubt, Fox News, talk radio and other right-wing media have an impact on many American voters by pushing Republican talking points. MSNBC and other left leaning media also influence voters on the left – but have less of a reach given that voters on the right are more antagonistic to “mainstream media” than voters on the left. Additionally, social media is obviously a major factor in ensuring that American voters all across the political spectrum hear news and opinions that confirm their pre-existing views and biases.

I recently saw a meme on Facebook blaming Joe Biden for the high prices of many grocery items. The list included items like cocoa (+345%), orange juice (+260%), olive oil (+219%), sugar (+120%), fruit snacks (+77%), cooking oil (+54%), and chocolate bars (+52%).

Is Joe Biden responsible for these high prices?

Of course, people do not judge inflation only on food. Gasoline is the other main item most Americans (or at least, those with cars) buy several times a month. American consumers view inflation disproportionately based on food and gasoline prices.

Food and energy prices are very volatile – and like many other prices, they frequently go down and not just up. So, inflation is often measured to exclude these types of price changes to only measure “core inflation”.

And then there are interest rates. People might pay interest on credit cards, but interest rates tend to be important only when buying a big ticket item, like a car or home, or when refinancing a mortgage – which is more of an issue in Canada, where mortgages tend to be 5 years or less while US mortgages typically have long terms.

Inflation is still a little above pre-pandemic levels, but wages also grew fast since 2019 and wage increases in the US are actually running higher than price inflation!

So, why do people in the US feel the economy is so bad -even if we ignore partisan biases?

The US is the world’s dominant economy in terms of GDP. The president is obviously the most powerful person in the US, and as elected leader has powers nobody else has. So, is Biden to blame for prices, while he gets no credit for low unemployment and the fact that wages are increasing?

Part of it might be inequality. The problem with wage increases is that not all groups might be equally benefitting. Certainly the rich have been getting richer in the US, Canada, and elsewhere since the rise of neoliberalism in the 1970s. So, possibly it is just highly educated white-collar workers who are getting high gains in hourly earnings while other workers miss out. If the reverse was true, that inequality was decreasing, the majority of people would likely not perceive that prices were such a problem. In 2021, when both the Canadian and American governments were providing pandemic related benefits, no doubt many people felt richer despite prices rebounding from mid-2020 (when oil prices and other commodities dropped in prices due to low demand).

Even though it is a major importer of consumer goods from China, Mexico, and even Europe, the US exports tend to be in things that consumers do not buy: airplanes/aerospace, military equipment, intellectual property, and ironically in oil, gas, and petroleum products.

But the US does not drive inflation globally. Prices of commodities like oil, grains, steel, chemicals, and so on are set by global markets where China, Europe, OPEC, and other nations or groups of nations play a huge role. All the other G7 countries experienced similarly high rates of inflation from early 2021 to 2023, just like the US.

Supply chain issues and shutdowns meant some production was permanently lost, and this meant shortages during the pandemic and higher prices, which were not reduced. Many of the supply chain issues originated in Asia, particularly with computer chips. What does seem odd is that US inflation was initially higher than other G7 countries, taking off just as Biden was sworn in and before Biden had done anything whatsoever – other than signing a few executive orders. It usually takes months for most policies to have any impact as people act and markets adjust – the stock market is the major exception as prices can change in milliseconds with automated trading and algorithms acting faster than humans could.

This really brings us to the big question: what powers does a US President actually have, and does everybody, particularly the media, give too might weight to the role of the US President?

Remember the Wizard of Oz. It is hardly a spoiler to say that of course the Wizard is essentially a myth created by special effects, and the reality is the Wizard is a confused, weak old man. The book was partly a political allegory for US political figures of the 1890s, and for issues like the gold standard (hence the yellow bricks!). According to one interpretation, the Wizard represents the “evasive, hard-to-pin-down President William McKinley”.

The US President certainly has powers, not least of which is the control of the “nuclear football” that would launch an immediate nuclear attack and likely end the world as we know it. But when it comes to the economy, the US system was designed with three branches and all sorts of checks and balances.

US political decisions are split along these lines:

  1. President
  2. Cabinet Members/Secretaries
  3. Government appointees
  4. Agencies
  5. Federal Reserve Bank
  6. House of Representatives
  7. The Senate
  8. Federal Courts (SCOTUS) and state courts
  9. States (Governors, legislatures, agencies)
  10. Local governments

Even then, the US is constrained by treaties and various bodies that cannot be easily broken or ignored, like the World Trade Organization (WTO) and various tribunals or international courts. Additionally, the US has allies it can influence but also has to consider when making decisions which might affect them.

The president may nominally be the head of his or her political party, but controlling an American political party is like herding cats. Rarely does any US president or presidential nominee command the power that Trump seems to have accumulated over his party, even when out of office.

According to the Harry Truman Presidential Library website, here are the powers of a US President:


  • make treaties with the approval of the Senate.
  • veto bills and sign bills.
  • represent our nation in talks with foreign countries.
  • enforce the laws that Congress passes.
  • act as Commander-in-Chief during a war.
  • call out troops to protect our nation against an attack.
  • make suggestions about things that should be new laws.
  • lead his political party.
  • entertain foreign guests.
  • recognize foreign countries.
  • grant pardons.
  • nominate Cabinet members and Supreme Court Justices and other high officials.
  • appoint ambassadors.
  • talk directly to the people about problems.
  • represent the best interest of all the people


  • make laws.
  • declare war.
  • decide how federal money will be spent.
  • interpret laws.
  • choose Cabinet members or Supreme Court Justices without Senate approval.

The Presidential can issue “executive orders” and “signing statements” to command the cabinet, agencies, and employees to take actions or interpret the law in certain ways, but these are often overturned by the courts.

Canadian prime ministers and politicians have often tried to work with US presidents, but made the mistake of thinking that the president could actually keep promises made to Canada. In reality, the president has few direct powers other than a veto and the ability to appoint people to Cabinet. The President can craft American foreign policy, but has limited direct power over many issues of trade without getting Congress to pass a law to implement an agreement or approve a treaty.

When it comes to inflation, a lot of blame has been placed on the massive amounts of government spending in both the US and Canada in 2020 and 2021. The massive spending approved to prevent economic collapse, fund vaccination programs and research, provide incomes to individuals and families, and particularly to help businesses maintain employees and continue operating (airlines in particular) did end up flooding economies with a lot of cash – which some now blame for high inflation.

The 2008-2009 Global Financial Crisis also led to massive bailouts and government stimulus. Despite requests by then President Obama, the Republican controlled Congress tended to not grant all the stimulus that was requested. This lack of sufficient stimulus was blamed for the long, slow, tepid recovery from 2009 to 2015 in the US. This has been seen as a mistake by many economists like Paul Krugman, and so in 2020 and 2021, under Trump and Biden, there was clearly a desire to not under-stimulate the economy and to create jobs to get back to “normal” rapidly.

Even so, Biden did not get all the spending he wanted. Some of the spending that did pass, such as the massive infrastructure spending act, will take at least a decade to actually complete, despite being approved under Biden.

Were it not for Democrat Senators Joe Manchin and Kyrsten Sinema, the Democrats would have passed even more spending. However, this still means spending is not Biden’s fault alone. He and his staff played key roles in drafting bills and negotiations, but ultimately other than threatening to veto a bill to force changes, Biden has to sign whatever Chuck Schumer, Nancy Pelosi and the Democrats could pass.

So far, we have only looked at what role the US government has played since 2020. There is another potential cause of high prices – profiteering and lack of competition. You could also call it corporate greed. The laws of supply and demand usually mean prices will drop when supply increases. However, when a market in any good or service is controlled by a handful of companies, or even is effectively a monopoly, prices will stay high and profits will increase.

Canadians are used to hearing that there is a lack of competition here – we have two main airlines, three cellphone companies, and five to six major banks. The concentration in these sectors is often mentioned as a prime example of oligopoly in Canada.

However, there are the same complaints in the US that mergers and acquisitions have led to too little competition in those same sectors there. The US government under Biden is doing far more than the Canadian government to take on companies like Apple and other tech giants over high prices and anti-competitive behaviour.

Getting back to the internet meme blaming Biden for high food prices, it is hard to blame Biden for the top four items with over a 100% increase since 2019 (cocoa, orange juice, olive oil, and sugar). For a start, both cocoa and olive oil are mostly grown and produced outside the US.

Oranges and sugar mainly come from the Southern US, particularly Florida, which is a Republican controlled state. US sugar production has been widely subsidized and protected for years (to the tune of about $4 billion per year) instead of having a free market in that sector.

Oranges, olive oil, cocoa, and sugar are all items which are highly dependent on weather – as well as other factors like diseases and viruses. The issues affecting these commodities are mostly out of the control of government, with the exception that global warming/climate change is being blamed in part – particularly with oranges affected by higher temperatures, and olives affected by drought.

If global warming/climate change is having an impact on food prices, certainly Biden and Trudeau’s opponents are not strong on doing anything to reduce emissions or deal with this problem.

The problem is that the media treats the US presidency like a powerful Wizard of Oz that can be blamed for things that have not or cannot be fixed. In reality, any meaningful action has to come from Congress, and the current Congress is particularly dysfunctional. In the Senate, there is a one vote Democratic margin – along with two senators who are not team players. The situation is even worse in the Republican controlled House, which has more interest in embarrassing Biden than in actually accomplishing anything. Only rarely will a few Republicans break away to go against the speaker and help the Democrat minority pass something on a bipartisan basis. And of course, immigration reform was killed at Donald Trump’s specific request.

So, while Biden might be underwhelming as a president, and many people wish he would not run for re-election, the US economy is actually in better shape than any G7 country – though not everybody might be prospering, and many feel left behind.

Canadians know all too well that our economy is heavily dominated by what happens outside of our borders, particularly the US economy. Prior to 1973, our economy moved almost exactly as the US did on inflation and unemployment, except perhaps under Diefenbaker.

Justin Trudeau is extremely unpopular, and economic conditions are a key part of this. But Canada’s political system is that of a UK style parliamentary system, with a weak appointed Senate in place of the House of Lords, and a mostly symbolic head of state.

Power in Canada is concentrated in the prime minister – the head of government – not in the head of state like the US presidency. But even among UK derived parliamentary democracies, power is far more centralized with the prime minister in Canada than in the UK, Australia, or New Zealand. Canada has been called an “elected dictatorship”, particularly when there is a majority government.

Prime Minister Trudeau only has a minority in Parliament, but the NDP have propped him up in return for a list of concessions that Trudeau has slowly and reluctantly been implementing.

When it comes to inflation, specific food prices here do not always bear any relationship to US food prices because of things like supply management. Canadians pay more for dairy and some other food items due to supply management, but sometimes prices in Canada can be lower if they spike in the US.

Gasoline prices in Canada are higher, mainly due to taxes, but Canada generally pays world prices for oil, or at least North American prices. For example, when Biden released oil from the US oil reserve, this action reduced oil prices in both the US and Canada. Canada has no similar oil reserves we can tap into or use to impact prices, even if we wanted to.

Inflation in Canada in 2023 and 2024 is focused more on housing affordability and rent, as well as the impact of high interest rates. Like the Federal Reserve Bank in the US, our Bank of Canada is run independently of elected politicians for the most part – other than the appointments of people to run it. Canadians might feel Trudeau is to blame for high interest rates, but there is no direct relationship beyond monetary policy being influenced by the government’s general impact on the economy.

Other than housing, the opposition Conservatives and their leader have had one issue that they tie to inflation – carbon taxes.

Economists and experts try to explain that for most people the taxes are not inflationary, and that people get a carbon credit in most provinces (Canada is something of a patchwork when it comes to carbon pricing, and not all provinces have carbon taxes given other forms of carbon pricing have been implemented).

Canadians, like Americans, seem to feel that the “cost of living” is a problem. I want to make a distinction here. The “rate of inflation” is a measure of how much prices are increasing month to month, or over the last year. Rates of inflation are down for nearly everything, as shown in the chart above.

The cost of living is the perception that prices are high, or are not reasonable or affordable, even if the price is no longer increasing.

There is also the idea of “sticker shock” – people react strongly to a price, particularly when they have not bought something in years (like a car) and the interim inflation has raised the price even though inflation is now low.

A base Toyota Corolla is $26,385. It was $16,000 in 2015, though the new one includes things the 2015 based model lacked. A 1980 Corolla was $5,200. The amount of shock can depend on when you last bought something. A Burger King Whopper meal (Medium) is $12,89. Yes, the price seems to be a whopper too.

Rents in Toronto plunged in 2020, as people fled the inner cities and few immigrants (permanent or temporary) came into Canada given the reduction in flights and high unemployment. But now, rents are skyrocketing. Meanwhile, house prices are high but stable, and it is mortgage rates that make affordability worse – though rates have now peaked, and will likely decline. However, new condo projects have been cancelled, and resales are down, and there is a record level of inventory for sale on the MLS website.

So, if most of Canada’s inflation is largely outside of the control of Canadian governments, including Justin Trudeau, then can he really only be blamed for high housing prices and rents?

Well, yes and no. Canada’s high rents and housing prices are finally being connected to high population growth and high immigration by economists and the media, and even the Trudeau government has grudgingly paid attention and made minor cuts to temporary residents who will be allowed in – but the damage is already done.

Most of the discussion surrounding the housing issue has explained it as a “supply” problem, not a problem of demand. This explanation is popular despite the fact that housing starts peaked in 2022 and 2023, and Canada has a record number of housing units under construction. However, the problem is often still siloed as a supply problem alone. Provincial governments are not calling for immigration cuts, and some – like in Nova Scotia – want high population growth to continue. Under Premier Tim Houston, Nova Scotia’s government actually wants to double its population.

Canada’s immigration policy underwent a fundamental change in 1990. Under Brian Mulroney, Canada went from a “tap on, tap off” policy connected to unemployment to one of high, constant, or growing immigration with a 1% target – though usually the rate was around 0.75% of population.

Canada’s housing market was weak until the late 1990s, but since then has risen dramatically to 2019 – with perhaps the only blip being the 2008 financial crisis.

Canada was already experiencing serious housing affordability problems under Stephen Harper, when permanent immigration was around 250,000 per year and temporary immigration had a net rate not very high above zero, since most people left when their visas expired (or so was thought, since this was estimated and not closely tracked, and as a result the number of people who over-stayed visas over time is essentially unknown).

Justin Trudeau’s government started ramping up immigration almost immediately after it was elected in 2015, partly due to the influence of former McKinsey head Dominic Barton who was appointed to lead a key economic policy committee. Barton also co-founded the Century Initiative non-profit lobby group, which recommended doubling immigration to reach a target of 100 million population in 2100, by means of 500,000 immigrants a year.

So, when it comes to housing inflation and rent inflation, the buck stops with Justin Trudeau and his government.

There is an additional factor here too – incomes. While US GDP per capita is growing strongly and is back on its prior trajectory under Biden, Canada’s GDP per capita growth has been slipping since 2015. It is now actually declining in what economists call a “population trap”, which is usually only seen in poor countries with high birth rates.

As with the US, inflation in Canada is low, and unemployment is low compared to recent decades, but the cost of living seems to be terrible because of a combination of a lack of housing affordability and dropping income levels. And then, with our dollar at a low around 73 cents, Canadians cannot even go back to cross border shopping to save money, and vacationing in the US is less affordable than it used to be.

Neither Biden nor Trudeau can be blamed for much of the disenchantment with the economic conditions in the countries they respectively lead, but there is certainly a stronger case for blaming Trudeau. Trudeau has had a longer tenure in office (nine years versus less than four for Biden). Additionally, Trudeau’s immigration errors were entirely self imposed, and had a much greater impact on both prices and incomes in Canada than any failure by Biden to deal with the southern border issue has had on the American economy.

Economies are highly complex, and government policies often have little short-term effect, and yet political leaders are often blamed in the media for things over which they have little control. We need to move away from this and be more realistic. At the same time, it doesn’t help if politicians deny or ignore their actual abilities to influence the economy, and fail to accept blame when it is clear they added to the problem – as Trudeau has done with a naïve, over ambitious immigration policy that he adopted by stealth and with no prior public debate.

In the upcoming elections in both the US and Canada, while Biden and Trudeau might be accused of being responsible for inflation or high prices, inflation is now moderate and neither Trump nor Poilievre have really put forth any solutions to lower it, increase competition, or the raise standard of living (GDP per capita being the most convenient measure).

At best, Poilievre is now proposing to “cap” permanent immigration at 400,000 per year and lower the net inflow of temporary residents – but this is still above the immigration levels under Stephen Harper and Paul Martin that saw home prices outpace incomes so dramatically after 2000. Canada’s higher level of immigration is the only plausible explanation for why Canada differed so markedly from the US on the issue of housing affordability – and Trudeau made a bad situation far worse.

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