The news that inflation hit a 31-year high in October, increasing at an annual rate of 6.2 percent, has made it extremely difficult for anyone to deny that inflation is real. Most economists acknowledge that it now constitutes a threat to the incipient economic expansion and the standard of living of US households.
However, the Biden administration is doing its best to obfuscate this reality: Its statement after the inflation news appeared attributed the spike in prices solely to an increase in gas prices (which is largely due to the administration’s actions) and transportation bottlenecks that it claims to be working vigorously to address.
But to maintain that the elevated increases in the consumer price index are solely due to one or two industries, and that the government can quickly fix them, is nonsense.
Inflation ticked up shortly after the Biden administration passed its $1.9 trillion American Rescue Plan — just as the economy had already begun to grow of its own accord as people got vaccinated and cities and states began to ease their quarantines.
Plenty of economists warned the administration and Congress that no stimulus was needed at the time, and Larry Summers — no Republican stooge — told them that an enormous amount of new spending at that time was bound to be inflationary, but they ignored him: If they didn’t spend the money, they might not get credit for the economy’s inevitable boom that we’ve seen thus far in 2021.
Not only did the money overheat an already robust economy, but — as Summers also warned — it complicated their plans to use reconciliation rules to pass their multitrillion-dollar package of expanded entitlements and a variety of other goodies on the progressive-socialist wish list.
Moderate senators — and there are several besides Joe Manchin and Kyrsten Sinema — don’t want to face voters in purple states with their constituents angry about higher prices. The very real specter of inflation undoubtedly played a role in Glenn Youngkin’s victory in the Virginia gubernatorial race, and it manifested the reality that Joe Biden was not elected to instill a European-style soft socialism but mainly to give the country a break from the daily stresses of the Trump administration.
Adding another $2 trillion or so from the so-called Build Back Better bill currently being debated in Congress would only serve to exacerbate inflation, injecting hundreds of millions of additional dollars into the economy each year. The worst time to enact such legislation is when the economy is suffering a shortage of labor — along with a host of goods and services.
While a good portion of the recently passed infrastructure bill will be completely wasted on things like expanding passenger rail in places where no one wants to use it, and many states will respond to increased federal spending on roads and bridges by decreasing their own contributions to infrastructure spending, it at least attempts to do some things that could increase the economic output of the country.
Build Back Better does nothing of the sort: It’s targeted on giveaways to please Democratic constituencies with no regard to its impact on the economy.
The urgency to pass the bill has only increased within the party, given that it seems inevitable that the Republicans will take back the House and quite possibly the Senate in 2022, making this the Democrats’ last chance in a generation to reward their constituent groups with a big box of goodies. Who cares about the rest of us?
Ike Brannon is a senior fellow at the Jack Kemp Foundation.
