Inflation soared to a 31-year high in October. Now, it seems President Biden and his allies are sensing inflation may endanger their reckless tax and spending agenda. As a result, they have taken to arguing that the cure for inflation spurred by their reckless spending is to pursue even more reckless spending.
I’m not buying it and the American public aren’t either. President Biden and his allies have been wrong about inflation from day one and they are wrong now.
Immediately after taking office, they pursued a partisan $2 trillion liberal wish list package under the guise of COVID relief.
Congress had already approved $4 trillion in bipartisan relief, including a nearly $1 trillion bill only a month prior to his inauguration. Our economy was already on the road to recovery and highly effective vaccines were allowing economic activity to bounce back quickly.
I, along with many on my side of the aisle, warned that adding $2 trillion on top of the existing relief still entering the economy risked sparking inflation. And, it wasn’t just Republicans sounding the inflation alarm.
Long-time Democrat economist Larry Summers, who held top posts in both the Obama and Clinton administrations, also made his inflation concerns known. In a February Washington Post op-ed, he warned President Biden’s so-called COVID package might “set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability.”
With a prominent liberal economist such as Larry Summers raising inflation concerns, one would think the President would begin to take the risk of inflation seriously. Instead, President Biden, and senior administration officials, doubled down, arguing the real risk was not spending enough.
Think about this for a second.
Congress had already spent almost as much responding to COVID, in inflation-adjusted dollars, as it did waging World War II. Yet, we were expected to believe too little spending, not inflation, was the real risk.
In reality, President Biden and congressional Democrats were simply determined to not let a crisis go to waste. They couldn’t let a “high class problem” like inflation get in the way of passing “the most progressive piece of legislation in history.” How out of touch is that? Remember, inflation is a regressive tax that hurts the poor the most, increasing the cost of food, clothing and shelter.
Then in the months to follow, inflation began to tick upwards. In April, inflation clocked in at an annualized rate of 4.1 percent - the highest spike since the financial crisis in 2008.
Nothing to see here, Biden administration officials said. The inflation was solely due to “base effects” that resulted from prices being suppressed during the pandemic. In a month or two inflation was supposed to return to normal.
Around the same time, President Biden released his reckless tax and spending agenda calling for an additional $4 trillion in spending. Larry Summers again sounded the inflation alarm, warning,“we are injecting more demand into the economy than the potential supply…and that will generate overheating.”
Skip ahead a month to June. Inflation surges higher to 5.4 percent. Again, the Administration claimed there is nothing to worry about. We were told, inflation is merely “transitory” and solely the result of bottlenecks in the supply chain.
Inflation remained at those elevated levels from July through September. Inflation was persisting longer than the Administration expected, but they were still sure it was only transitory.
According to President Biden, “no serious economist” was predicting spiraling inflation.
Really? Larry Summers, Harvard professor and former Clinton Secretary of the Treasury isn’t a “serious economist”?
Then, earlier this month, the inflation numbers for October were released. Inflation surged to 6.2 percent; the highest inflation rate in 31 years. Only then did the Administration begin to acknowledge that inflation is a problem.
To do otherwise would be an insult to the intelligence of the American public. Hardworking Americans have been experiencing historically high price increases for more than half a year. The Biden inflation tax on average Americans is now $175 a month, which equates to an extra $2,100 a year.
Gone are the claims that inflation is transitory. Instead, according to President Biden “Inflation hurts Americans' pocketbooks, and reversing this trend” is his “top priority.”
Now President Biden and his allies claim the key to reversing the inflation trend is to enact the same reckless tax and spend agenda they’ve been pursuing all along. How convenient. The solution to surging inflation is the same agenda he’s been pursing all along.
I won’t go as far as President Biden and try to claim “no serious economist” agrees with him. However, even the economists cited by the Administration as supporting their agenda do so with caveats. Those caveats include that their spending policies are entirely paid for and are structured in a way that will increase labor productivity.
The current version of their spending plans doesn’t come close to meeting those huge caveats. The President claims his agenda is completely paid for, but those claims rest solely on sleights of hand and budget gimmickry.
Their largest gimmick comes from artificially sunsetting spending provisions they do not intend to expire while imposing permanent tax hikes.
Even taking President Biden’s claims at face value, his agenda will result in hundreds of billions of dollars of increased deficit spending in the near term fueling current inflation pressures.
Moreover, according to a Penn-Wharton Budget Model analysis, under the more realistic assumption that their spending proposals are made permanent, their plan would increase debt and deficits by more than $2 trillion over ten years.
As a result, by 2050, government debt would be 24 percent higher, economic growth would be three percent lower, and wages would be 1.7 percent less than they otherwise would be. That’s Building Back Worse.
The bottom line is the President’s ill-designed tax and spending spree isn’t deficit neutral, won’t boost productivity, but it will fuel inflation. It’s time to pause and rethink this approach.