The White House Says More Government Spending Will Fix Inflation
As American workers grapple with soaring inflation—the consumer price index rose 6.2 percent since last October, the largest single-year increase in 30 years—the Biden administration has a plan: spend lots of money.
President Joe Biden said this week that the government spending authorized by the “Build Back Better” agenda will make goods affordable again by subsidizing Americans’ costs and making workers more productive.
A New York Times piece that attempts to defend the administration’s contentions does concede, however, that a result of all this spending could be a temporary increase in inflation:
A wide range of economists agree with the president — but only in part. They generally accept his argument that in the long run, the bill and his infrastructure plan could make businesses and their workers more productive, which would help to ease inflation as more goods and services are produced across the economy.
But many researchers, including a forecasting firm that Mr. Biden often cites to support the economic benefits of his proposals, say the bill is structured in a way that could add to inflation next year, before prices have had time to cool off.
Some economists and lawmakers worry about the timing, arguing that the risk of fueling more inflation when it has reached record highs outweighs the potential benefits of passing a big spending bill that could help to keep prices in check while addressing other social goals. Prices have picked up by 6.2 percent over the past year, the fastest pace in 31 years and far above the Federal Reserve’s inflation target.
Former Treasury Secretary Larry Summers, who was also the director of the National Economic Council during the Obama administration, criticized Biden this week for not taking inflation seriously. According to the New York Post:
“I think we’re speeding down the road at a really rapid rate,” Summers told CNN’s “Cuomo Prime Time” Wednesday. “It’s kind of a downhill road. And it’s not going to be so easy to put the brakes on here. And that’s why I’m concerned.”
Summers spoke on the same day that the Labor Department announced that its Consumer Price Index, which measures the cost of a basket of goods and services as well as energy and food, had jumped 6.2 percent in October from a year earlier — the biggest 12-month rise since 1990.
“I think that the policymakers in Washington, unfortunately, have almost every month been behind the curve,” Summers said Wednesday. “They said it was transitory; it doesn’t look so transitory. They said it was due to a few specific factors; doesn’t look to be a few specific factors. They said when September came and people went back to school, that the labor force would grow, and it didn’t happen.”
Sen. Joe Manchin (D–W.Va.), who will cast the deciding vote on any significant piece of spending legislation, is known for being deeply concerned about inflation, and may kill or delay the “Build Back Better” agenda to prevent it from getting worse.
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