The GOP and their mouthpieces at Fox News would have you believe that Joe Biden is destroying the economy and that his spending on infrastructure and social programs will drive us into the wall. Well, to quote the president, guess what:
President Joe Biden’s infrastructure and social spending legislation will not add to inflationary pressures in the U.S. economy, economists and analysts in leading rating agencies told Reuters on Tuesday.
Biden has spent the past few months promoting the merits of both pieces of legislation – the $1.75 trillion “Build Back Better” plan and a separate $1 trillion infrastructure plan.
The two pieces of legislation “should not have any real material impact on inflation”, William Foster, vice president and senior credit officer (Sovereign Risk) at Moody’s Investors Service, told Reuters.
The impact of the spending packages on the fiscal deficit will be rather small because they will be spread over a relatively long time horizon, Foster added.
Senator Joe Manchin, a centrist Democrat, has previously raised inflationary concerns in relation to Biden’s social spending plan, with a report earlier this month suggesting he may delay the passage of the Build Back Better legislation.
“The bills do not add to inflation pressures, as the policies help to lift long-term economic growth via stronger productivity and labor force growth, and thus take the edge off of inflation,” said Mark Zandi, chief economist at Moody’s Analytics, which operates independently from the parent company’s ratings business.
Zandi said the costs of both the infrastructure and social spending legislation were sustainable.
“The bills are largely paid for through higher taxes on multinational corporations and well-to-do households, and more than paid for if the benefit of the added growth and the resulting impact on the government’s fiscal situation are considered”, he said in an interview.
Charles Seville, senior director and Americas sovereigns co-head at Fitch Ratings, said the two pieces of legislation “will neither boost nor quell inflation much in the short-run.”
Government spending will still add less to demand in 2022 than in 2021 and over the longer-run, the social spending legislation could increase labor supply through provisions such as childcare, and productivity, Seville told Reuters.
The House of Representatives passed the $1 trillion infrastructure package earlier this month after the Senate approved it in August. Biden signed the bill into law on Monday.
The Build Back Better package includes provisions on childcare and preschool, eldercare, healthcare, prescription drug pricing and immigration.
Meanwhile, the jobs numbers and retail sales are taking off and big box stores are scrambling to get ready for pre-pandemic sales. Even the shipping crisis is easing.
The Republicans say they will save the economy by blowing up the deficit and cutting taxes while the Democrats have to clean up the mess. Lather, rinse, repeat.