Biden’s inflation pitch doesn’t pass the laugh test
President Joe Biden has taken to saying that the Democrats’ “Build Back Better” legislation will reduce inflation. This spin isn’t just unconvincing. It underscores the absurdity of the Democrats’ political project.
The first weakness of Biden’s argument is that the timing is all wrong. On Nov. 10, the White House issued a prepared statement from Biden claiming that “17 Nobel Prize winners in economics have said that my plan will ‘ease inflationary pressures.’ ”
What they actually said is that it will “ease longer-term inflationary pressures.” Several of these economists say that Biden’s spending plans aimed at climate change, education, child care, housing and many other social programs will increase inflation in 2022 by pumping more money into the economy. Any downward pressure on prices would come later, as productivity increases in response to new federal investments in people and infrastructure.
But it’s the inflation that’s already happening that has Americans worried, which is surely why the White House erased the economists’ inconvenient qualifier. While this burst of inflation has lasted longer than many economists thought it would, it is still expected to decline over time — whether or not Biden gets the bill he wants — as the pandemic recedes and supply chains are rebuilt. Market-based projections of inflation have moved around a lot this year, but have consistently shown higher numbers for the next five years than for the five after that.
Even the economists’ long-term prediction is open to question. It assumes the legislation will succeed in making the U.S. economy appreciably more productive. The Penn Wharton Budget Model, on the other hand, estimates that the net effect of the Democrats’ bill on the economy, even in the very long term, will be negative. It finds that some provisions will increase the number of hours Americans spend on the job, for example, but others will reduce it even more.
A political weakness of Biden’s inflation story, beyond its dubious merits, is that it is obviously opportunistic. He is saying what he is saying because he thinks a lot of Americans want him to address the rising cost of living. But nobody can believe that Democrats adopted this plan in order to reduce inflationary pressures, now or ever. It isn’t at all what you’d come up with if putting downward pressure on prices were your priority. And it would be an extraordinary coincidence if what the Democrats wanted well before inflation developed just happened to be exactly what the doctor ordered to cure it.
The mismatch between the need to get inflation down and the Democrats’ spending initiatives raises two uncomfortable questions for the party. The first is why the Biden administration does not have a genuine anti-inflation agenda. I suspect it’s because the Democrats’ instinctive policy response to economic problems is to increase demand through subsidies and restrict supply through regulation. That’s how they approach health care, child care and higher education, and it tends to produce higher rather than lower prices.
Targeted deregulation and tariff reduction would ease some supply shortages, but the administration has shown no interest. More automation of ports would improve their efficiency over the long run, but unions have resisted it and the bipartisan infrastructure bill Biden signed on Monday blocks any funds from going toward it. The Democratic Party’s interest groups and ideology combine to stop it from fighting to cut costs.
The second question is why Biden and the Democrats have put so much of their effort behind Build Back Better in the first place. Fighting inflation is not a plausible answer. But Democrats have struggled to articulate a better one. In part that is because such consensus as the party has had is too vague to sustain a compelling explanation. Nearly all of the Democrats in Congress have been united in wanting to increase spending by $1.5 trillion or more during the next decade. When it comes to what the money is supposed to be spent on, they have had different priorities.
It’s the weirdly unfocused nature of their legislative agenda that has made coherent “messaging,” as the pols like to say, impossible. Biden could have spent the last five months arguing that paid family leave is a crying national need and vowing to meet it. But for much of that time, it was unclear whether the bill would include it, and if so whether it would be a serious or token effort. Inevitably, then, the discussion of the bill has focused on the price tag.
The truth is that the Democrats aren’t pursuing this spending bill in the spirit of meeting a pressing national objective. They’re just trying to cram as much of the progressive agenda as they can get through Congress before Republicans can end their control of it in the next election. That’s not the kind of advertising pitch likely to work on the public, though. And so we have ended up with the president pretending that this bill is his big idea to whip inflation.