President Joe Biden is telling Americans not to worry about inflation in the face of massive spending by the federal government, with the promise of still more to come. But everyone buying gas, groceries and just about anything else knows prices are up, and there are voices sounding warnings that the country could be heading down the road to 1970s-style inflation.
At a press conference earlier this month, Biden argued that his latest plan — a dual measure that would spend on both infrastructure and broader domestic policy — will generate new jobs and new federal revenue while leading to lower consumer prices.
“My Build Back Better plan will be a force for achieving low prices for Americans looking ahead,” the president said, arguing that it “will enhance our productivity — raising wages without raising prices.”
“That won’t increase inflation,” he claimed. “It will take the pressure off of inflation, give a boost to our workforce, which leads to lower prices in the years ahead.”
The Biden plan includes spending to repair roads and bridges, transit projects, school buildings and hospitals, as well as outlays for green energy spending and domestic manufacturing.
Writing for InsideSources.com, Gregory Bresiger, author of a history of Social Security, “The Revolution of 1935,” reports what several skeptics have to say about Biden’s reasoning.
Mark Skousen, an investment researcher and an economics professor at Chapman University in Orange, Calif., has argued Biden’s proposal would repeat the policy mistakes of the 1970s when interest rates rose in some cases to over 20% amid stratospheric inflation.
“I expect price inflation to rise to 4% or more in the coming years, based on today’s policies,” Skousen recently wrote on his blog. He called the plan “a monstrosity.” The president, Skousen contended, proposes enormous spending on various “government boondoggles” such as “green energy” and “universal childcare.”
Florida Republican Sen. Rick Scott offered a similar assessment. “As Joe Biden’s inflation crisis rages, he just can’t stop fueling it with more reckless government spending,” he told Inside Sources in a statement. “Americans are experiencing 1970s-style inflation again, and it’s because of Joe Biden’s failed economic policies.”
Bresiger cites even Democratic voices questioning the wisdom of the levels of spending.
“[W]hile continuing relief efforts are essential, the focus of our macroeconomic policy needs to change,” former Clinton administration economic advisor Larry Summers recently wrote in The Washington Post. “The primary risk to the United States economy is overheating — and inflation,” he said, arguing in favor of the “reprogramming of Rescue Plan funds” to finance current infrastructure plans.
Summers previously warned that Biden’s $1.9 trillion COVID relief package was “the least responsible macroeconomic policy we’ve had in the last 40 years,” claiming it might “destabilize” the economy and that the U.S. could be in for “stagflation” in the near future.
Jason Furman, chairman of former President Barack Obama’s Council of Economic Advisers, recently told Bloomberg that Biden’s earlier COVID stimulus, passed in March, was “too big for the moment,” and that he “[didn’t] know any economist that was recommending something the size of what was done.”
Bresiger notes that economists of all backgrounds for decades have warned against policies that might reignite the economic turmoil of the 1970s and early 1980s, when three successive presidential administrations were all plagued by crushing economic issues. Those years were marked by double-digit inflation, slow growth and massive deficits.
Arguing that the influx of so much federal money into the economy will not impact inflation is specious. Saying it will lower inflation is simply wrong. A lot more dollars chasing the same or a declining amount of goods and services is a recipe for higher prices.