Comment: Gregory Bresiger – Biden promises to spend big, to control inflation; can he do both?

President Joe Biden expresses confidence that his proposed $ 4.5 trillion national package will actually pay off, even though experts fear the colossal price tag could trigger long-term inflation and other economic disruption.

At a press conference last month, the Democratic president argued that his plan – a double measure that would spend on both infrastructure and broader domestic politics – would generate new federal jobs and revenue while leading to lower consumer prices.

“My Build Back Better plan will be a force for lowering prices for Americans in the future,” the president said, saying it “will improve our productivity – by increasing wages without raising prices.”

“It will not increase inflation,” he said. “It will relieve the pressure of inflation, give a boost to our workforce, which will lead to lower prices in the years to come.”

The Biden plan includes spending on repairing roads and bridges, transit projects, school buildings and hospitals, as well as spending on green energy spending and domestic manufacturing. “Simply put, we cannot afford not to make these investments,” the president said.

Yet Biden’s sunny outlook has recently been contradicted in part by an inflation rate that, at least compared to recent years, is unusually high.

This month, the Labor Department announced that consumer prices in June were up 0.9% from May and 5.4% over the past year. The Bureau called the data “the largest one-month change since June 2008” and the largest annual increase since August 2008, respectively.

Echoing the somewhat sunny figures from the Bureau of Labor, several skeptics argue that Biden’s policies will have the opposite effect the president intends to do, pushing up inflation rates while pumping money into unnecessary government spending.

Mark Skousen, an investment researcher and professor of economics at Chapman University in Orange, Calif., Argued that Biden’s proposal would repeat the policy mistakes of the 1970s, when interest rates rose in some cases. at more than 20% in a context of stratospheric inflation.

“I expect price inflation to reach 4% or more in the coming years, based on today’s policies,” Skousen recently wrote on his blog. He called the plan a “monstrosity”. The president, Skousen argued, is proposing huge spending on various “government boondoggles” such as “green energy” and “universal child care”.

Florida Republican Senator Rick Scott offered a similar assessment. “As Joe Biden’s inflation crisis rages on, he just can’t stop fueling it with more reckless government spending,” he told Inside Sources in a statement. “Americans are experiencing 1970s-style inflation again, and that’s because of Joe Biden’s failed economic policies.”

Even some Democratic voices question the wisdom of sky-high spending levels. “[W]While continued relief efforts are essential, the direction of our macroeconomic policy must change, ”Larry Summers, former economic adviser to the Clinton administration, recently wrote in the Washington Post.

“The main risk to the US economy is overheating – and inflation,” he said, arguing for the “reprogramming of bailout funds” to finance current infrastructure plans.

Earlier this year, Summers warned that Biden’s $ 1.9 trillion COVID relief program was “the least responsible macroeconomic policy we’ve had in the past 40 years,” saying it could “Destabilize” the economy and that the United States could face “stagflation”. “in the near future.

Jason Furman, chairman of the Council of Economic Advisers to former President Barack Obama, meanwhile told Bloomberg that Biden’s previous COVID-19 stimulus, adopted in March, was “too big at the moment” and that he “[didn’t] know any economist who would recommend something the size of what has been done.

For decades, economists from all walks of life have warned of policies that could rekindle the economic turmoil of the 1970s and early 1980s, when three successive presidential administrations were all in the throes of crushing economic problems. These years were marked by double-digit inflation, slow growth and massive deficits.

Offering a somewhat more optimistic assessment, Christopher Russo, a researcher at the Mercatus Center at George Mason University, argued that whatever the political ambitions of the Biden administration, the Federal Reserve will seek to keep annual inflation at 2. % or less per year, tempering what critics warn may be the fallout from excessive White House policies.

“The Fed understands the lesson of the 1970s and I think it will make the right choice as long as it maintains its political independence,” he said.

Gregory Bresiger is the author of a Social Security history, “The Revolution of 1935”. He wrote this for

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