Biden: Plans will slow inflation
The lingering question is when?
Rocketing inflation has become a headache for U.S. consumers, and President Joe Biden has a go-to prescription. He says a key way to help relieve increasing prices is to pass a $1.85 trillion collection of spending programs and tax cuts that is languishing in the Senate.
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 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% over the past year, the fastest pace in 31 years and far above the Federal Reserve’s inflation target.
Others say that any near-term effect on prices would be small and easy enough for the Fed to offset later with interest rate increases, which can temper demand and cool a hot economy. They argue that potential inflationary risks are not a good reason for the Biden administration to curb its ambitions on priorities such as broadening access to child care and easing the transition to cleaner energy sources.
“It’s more likely a small positive for inflation in 2022, because it’s preventing a big reduction in spending that would otherwise have happened that year,” said Jason Furman, an economist at
Harvard and a former chief of the White House Council of Economic Advisers during the Obama administration. “The pros and cons of Build Back Better with regard to improvements in climate change and opportunity vastly dwarf any pros or cons on inflation.”
Republicans have criticized Biden on inflation for months, seeking to derail his sprawling proposal to fight climate change, guarantee universal prekindergarten, expand access to health insurance, cap child care costs