Biden’s inflation tax persists

The bill for Biden-era monetary policy is still coming due years later.

Kevin Warsh’s inaugural meeting as Chairman of the Federal Reserve propelled a stock market sell-off, with a hawkish shift moving expectations from rate cuts to a potential hike by year-end. The message is clear: inflation isn’t going away.

U.S. inflation has now remained above the Fed’s 2% target for more than five consecutive years. While Democrats assign blame to the current administration, the reality is that Biden-era monetary policy, not tariffs or geopolitical conflict, has been the most destructive and lasting force driving today’s troubled economic picture.

The Root of the Overheating Economy

The misplaced culpability is striking. Inflation hit 9.1% in June 2022 under Biden, the largest annual increase in more than 40 years. Yet a recent Fox News survey found that for the first time since 2010, Americans now favor Democrats over Republicans on managing the economy.

The root cause is clear. The Biden administration’s post-pandemic stimulus was excessive, overheating the economy at precisely the moment when supply chains were still strained, labor markets were distorted, and consumers were already seeing prices rise.

The Fed’s subsequent overreaction compounded the damage. After spending too long insisting inflation was “transitory,” the central bank was forced into one of the sharpest tightening cycles in decades, raising rates by more than 500 basis points from March 2022 to July 2023.

Fragile Headlines vs. Household Reality

The U.S. economy has still not fully recovered from either move. The evidence is everywhere. Consumer sentiment recently fell to the lowest level recorded since the University of Michigan began tracking the measure in the 1950s. Household debt has climbed to nearly $19 trillion, a record high.

Inflation remains above the Fed’s target, and for many Americans, wages have not kept pace with the cumulative rise in groceries, rent, insurance, utilities, and car payments.

Even the stock market’s record highs tell a more fragile story than the headlines suggest. Major indexes have benefited from a narrow rally concentrated in a handful of large technology and AI-related stocks, while many credit-sensitive, consumer-facing, and small-cap companies have been left behind.

For investors, the lesson should be obvious: the economy can look healthy at the index level while deep stress builds underneath the surface.

The Meltdown of Subprime Auto Lending

Nowhere is the fallout more visible than in consumer lending. Sustained high interest rates and relentless volatility have hit subprime auto especially hard, with severe delinquency rates reaching record highs and surpassing levels seen during the Great Recession.

The buy-here-pay-here segment is among the hardest hit.

Two of the country’s largest operators, U.S. Auto Sales, founded in 1992, and American Car Center, founded in 2000, both filed for bankruptcy in 2023 as credit conditions tightened, their cost of capital became unsustainable, and their customer base faced mounting financial stress.

The most highly publicized collapse was Tricolor, which had issued more investment-grade bonds than any operator other than DriveTime.

Tricolor filed for Chapter 7 bankruptcy in September 2025, sending shockwaves through the auto financing world and raising new questions about underwriting, securitization, and lender exposure in the subprime market.

America’s Car-Mart, the segment’s only publicly traded company, has seen its market cap fall from an all-time high of roughly $1.4 billion in 2021 to around $20 million, down approximately 99%. Of the five largest operators in the industry, DriveTime is the only survivor.

A Long Tail of Policy Failure

The contagion extends beyond buy-here-pay-here. Carvana, DriveTime’s spin-off and one-time used-car disruptor, recently saw multiple bonds across its three 2023 securitizations downgraded by S&P, which cited inflation, high interest rates, and escalating credit losses.

That matters because Carvana is not a neighborhood buy-here-pay-here lot. It is a national platform that was supposed to represent the future of used-car retail. If even that model is being squeezed by deteriorating loan performance, the problem is plainly bigger than any one company or any one corner of the market.

With Treasury rates rising and a rate hike now looming, any company carrying balance-sheet exposure faces mounting liquidity pressure. Warsh’s hawkish first meeting was a signal of how far there still is to go in cleaning up the mess Biden-era policy left behind.

The previous President’s missteps wrecked household finances, destabilized credit markets, and launched the buy-here-pay-here auto sector into a tailspin it has yet to pull out of. The true story behind the sector’s collapse is not isolated corporate failure. It is the long tail of an economic policy failure whose bill is still coming due.

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