From Biden’s $1.9 Trillion “Rescue” Plan to Today’s Inflation
It’s not often you get to see cause and effect in action for government spending. Take the Biden-Harris administration’s $1.9 trillion “American Rescue” plan. That’s the one I described as a “failure of fiscal discipline” for which “ordinary Americans will ultimately pay” back in March of this year.
That spending bill is back in the news because it lived up to that billing! If you saw the October 2021 inflation report, you already know how ordinary Americans are paying for it. Whatever “sugar high” President Biden’s spending gave to the Americans who got “stimmy” checks has worn off.
Nowhere is that more evident than in former Obama-Biden administration economist Jason Furman’s observation on the origins of today’s inflation. Here’s how he described it:
A flood of government spending—including President Joe Biden’s $1.9 trillion coronavirus relief package, with its $1,400 checks to most households in March—overstimulated the economy, Furman said.
“Inflation is a lot higher in the United States than it is in Europe,” he noted. “Europe is going through the same supply shocks as the United States is, the same supply chain issues. But they didn’t do nearly as much stimulus.”
What does President Biden think?
On the day the inflation report came out, President Biden visited the Port of Baltimore. He was there to promote his shrinking Build Back Better spending plan, but he gave the following comments about the impact of spending from his American Rescue Plan:
Critics have blamed the government for inflation, arguing that printing more money to help with the COVID-19 pandemic will have long-term consequences. More moderate Democrats, like West Virginia Sen. Joe Manchin, voiced concerns over the administration’s push to spend money. Biden acknowledged this argument Wednesday, highlighting that “the first major piece of legislation” he passed gave Americans across the country checks for $1,400.
“And the irony is: People have more money now because of the first major piece of legislation I passed,” Biden said after detailing how global supply chains have helped lower costs for Americans but made the country “more reliant on what happens” around the world.
“You all got checks for $1,400. You got checks for a whole range of things. If you’re a mom and you have kids under the age of 7, you’re getting 300 bucks a month, and if it’s over – over 7 to 17, you’re getting $360 [sic] a month – like wealthy people used to when they’d get back tax returns. It changes people’s lives.”
“But what happens if there’s nothing to buy and you got more money? You compete for getting it there. It creates a real problem,” the president added.
Since then, President Biden’s advisers have run around claiming the coronavirus pandemic is responsible for today’s problems with rising prices and not their policies. That’s a sign they haven’t yet learned what they need to deal with today’s rising prices.
What should President Biden and his advisers learn?
That real problem is called inflation. In the real world, people earn money from engaging in productive activities, so when they to go spend money they earned, there’s more stuff to buy. But when you give out stimmy checks without requiring people engage in productive activities to earn them, there isn’t. America’s excess inflation is the result of a failure of fiscal policy.
Back in 1963, Nobel prize-winning economist Milton Friedman put it best: “Inflation is always and everywhere a monetary phenomenon.” Although Friedman passed away in 2006, President Biden has a weird fixation in trying to beat him in an economic argument.
Because President Biden is losing that argument, all Americans are paying higher prices.