Biden’s BBB certainly looks inflationary to us – HotAir

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At least in the short term, and that may be what matters most. Joe Biden tried to thwart the record inflation rage, obviously not “transient”, set in motion by his large incentive package in March, by pushing his Build Back Better proposal as an antidote. That sales pitch fell to the ground also to the New York Times, which points out that the massive $ 1.75 trillion note will create even greater inflationary pressures in the first year after the switch:

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 its infrastructure plan could make businesses and their workers more productive, which would help alleviate inflation as more goods and services are produced across the board. the economy.

But many researchers, including a forecasting firm that Mr. Biden often cites to back up the economic benefits of his proposals, say the bill is structured in a way that could raise inflation next year, before prices. have had time to cool down.

Some economists and lawmakers worry about the timing, arguing that the risk of fueling more inflation when it hits record highs outweighs the potential benefits of passing a large spending bill that could help keep prices in check while addressing other societal goals. . Prices have risen 6.2% over the past year, the fastest pace in 31 years and well above the Federal Reserve’s inflation target.

Offering a new grocery package to offset the inflation created by a previous grocery package sounds a lot like the “dog hair” strategy. Biden and his economic team ignored warnings about his massive incentive plan in March even from liberal economists like Larry Summers, insisting that the spending was necessary to trigger the economic pump. Why would anyone trust Biden’s promise that another drink would solve this hangover?

Speaking of which, Moody’s Analytics sees the bipartisan infrastructure bill as also net inflationary, which means the BBB will only add to that impact:

Moody’s Analytics estimated that the roughly $ 1 trillion infrastructure bill, which includes $ 550 billion in new spending, along with $ 2 trillion in social and climate spending, would add about 0.3 percentage points to inflation, on average, for the 2022 to the period 2024.

Republicans have tried to harness inflation ahead of next year’s mid-term elections, with plans to target vulnerable Democrats in office by linking inflation to Biden’s agenda.

“Voters will hold Democrats responsible for causing this inflation crisis with their overspending and inability to manage our nation’s supply chain,” said Mike Berg, spokesman for the Republican Party’s electoral arm.

Assuming it is a BBB in some form that the BIF is in place next year, we can expect further acceleration of inflation for most of 2022. This will continue to erode purchasing power and savings in households less if they can allow it, as inflation is in practice a regressive tax that hits the poor hardest. With this in mind, Democrats looking to the medium term have a few decisions to make:

Democrats must also limit defections to the House, where they have a narrow majority of 221-213. There, recent debate on the bill has focused on immigration, tax and paid leave provisions, as well as whether spending is fully paid for with new revenue, rather than the possible impact on inflation.

This may change now that inflation has proved far less “transient” than Biden promised. If we are still at inflation rates that exceed wage earnings for most of the primary season, the Democrats will get shredded to the polling booth in a year. Do they want to take this risk just to save Biden from a cascade of self-created trust crises? Most of them might just get the hobby items they can still pass, but “most” won’t. They can’t lose a single senator or more than three Democrats in the House. Biden would do better to prepare for a very personal deflation in the coming weeks.

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