A wave of government spending would reboot the economy. Fairer taxes would pay for restored infrastructure. Skills would be improved, productivity raised, and new digital champions would emerge. When Joe Biden was elected, he promised the most radical programme of economic reform since Franklin Roosevelt's New Deal in the 1930s, and, to his army of cheerleaders at least, the American economy was about to be completely transformed. But hold on. Only a year into his term, the reality is very different from the promises. In reality, the Biden Bust has arrived.
The US GDP figures released today was genuinely shocking. Instead of a modest slowdown in growth that was forecast, output is now shrinking in absolute terms. The American economy contracted by 1.4 per cent in the latest quarter compared to forecasts of a one per cent expansion. It was the worst quarterly figure since the second quarter of 2020 – right at the very height of the pandemic – when half the economy was shut down. Soaring imports accounted for a big chunk of the contraction, but so did pressure on retail sales and slumping investment. The fall in output comes off the back of figures earlier in the month that showed inflation hitting a 40-year high of 8.5 per cent. In effect, the US now has the worst of all possible worlds: falling output and rising prices. With the Federal Reserve also winding up its stimulus programme and raising interest rates, that is only set to continue.
It is hard to see that Biden has very much to show for the $1.9 trillion (£1.5 trillion) stimulus programme he launched in March last year. With that amount of money, he could have re-structured the tax system to unleash a wave of entrepreneurship. Or he could have built some decent airports and roads, or boosted defence systems, or reformed healthcare. Instead he mostly squandered the cash sending out cheques to everybody: most of which was either spent or invested in an already over-valued stock market. It was, without question, the most catastrophic start to a presidency in recent history.
It could have been very different. Donald Trump may have been personally obnoxious, but he bequeathed an economy in perfectly good shape. Biden's task was actually easier: with the recovery from the pandemic and businesses opening up again, output should have recovered very quickly. Instead, led by a small coterie of ultra-Keynesian economists, the president fell for the line that massive deficit spending was somehow a goal in itself, and would always pay off in faster growth. The results of that are now becoming clear. The US looks set for a long and painful recession.
So the Biden Bust has arrived. Worst of all, it is a crisis entirely of his own making – and for that he will have no one to blame but himself.