Last week, White House press secretary Jen Psaki asserted that “no economist” is predicting Build Back Better will raise inflation. PolitiFact rated that claim “false.”
At a news conference on Nov. 15, a reporter, noting that inflation is at a 31-year high, asked Psaki, “Why should Americans not be concerned that injecting another $1.75 trillion or more would further raise inflation?”
“Because no economist out there is projecting that this will have a negative impact on inflation,” she answered.
“And actually, what it will help do is it will help increase economic productivity,” Psaki continued. “It will help economic growth in this country. That and the Build Back Better agenda will help reduce inflation, will help cut costs for the American people over the long term.”
In its first fact-check of President Joe Biden’s press secretary, PolitiFact cited multiple economists who believe Build Back Better, which would launch multiple new entitlement programs, would cause inflation.
“I’m an economist, and I disagree,” Douglas Holtz-Eakin, president of the center-right American Action Forum, told PolitiFact.
“We know there’s lots of spending in the bill, and that it’s front-loaded,” he said. “If you cut taxes and increase spending, financed by debt, that will put upward pressure on inflation.”
Ethan Harris, head of global economics research at Bank of America, concurred.
“You should wind up with primarily a deficit-financed spending bill that is going to be rolled out in an economy near full employment. … It will make the labor market even hotter and create even more price pressure.’’
Michael Feroli, chief U.S. economist for JPMorgan Chase, said pumping more money into the economy right now is “not warranted, not advisable.”
“The economy seems to be operating pretty close to its capacity constraints,” Feroli said.
John Leahy, a professor of macroeconomics and public policy at the University of Michigan, explained to Politifact why Build Back Better would trigger inflation.
“Inflation is the result of too much demand chasing too little supply,” Leahy said. “An increase in government spending should increase demand and thereby increase inflation.
“This will happen even if the spending is fully paid for through taxes, since the government spending increases demand one for one and the taxes reduce demand only to the extent that firms or consumers reduce their spending as a result, and this reduction is typically less than one for one.”
Politifact concluded that Psaki is “wrong to say that no economist foresees inflation as a result of the bill’s passage. Numerous economists, including some allies of the White House, have gone on the record saying there probably will be inflationary effects, especially in the near term, if the bill is passed.”
However, the outlet reported that the general consensus is that Build Back Better would result in “modest and brief” inflation.
The U.S. is currently seeing a 6.8 percent annual inflation rate, the highest since 1990, when it was at 5.4 percent.
The present spike followed the passage of the $1.9 trillion American Rescue Plan in March and Biden’s moves to curtail domestic oil production.
A version of this article originally appeared on Patriot Project.
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