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Monday, November 29, 2021

Ramesh Ponnuru: Biden’s inflation doesn’t stand the test of laughter

President Joe Biden has often stated that the Democrats’ “Building Improvement” Act will bring inflation down. This option is not only inconclusive. This underlines the absurdity of the Democrats’ political project.

The first weakness in Biden’s argument is that the timing is wrong. On November 10, the White House released a prepared statement by Biden, which stated that “17 Nobel laureates in economics have declared that my plan will” ease inflationary pressures. “

In fact, they said it would “ease long-term inflationary pressures.” Some of these economists say Biden’s spending plans, aimed at climate change, education, childcare, housing and many other social programs, will boost inflation in 2022 by injecting more money into the economy. Any downward pressure on prices will come later, as productivity picks up in response to new federal investment in people and infrastructure.

But it is inflation, which is already happening, that worries Americans, and certainly this is why the White House has erased the inconvenient qualifications of economists. While this spike in inflation has lasted longer than many economists anticipated, it is expected to decline over time – whether or not Biden gets the bill he wants – as the pandemic recedes and supply chains recover. Market inflation forecasts have changed a lot this year, but they consistently show higher numbers over the next five years than over the next five years.

Even the long-term forecast of economists is questionable. The law is supposed to help make the US economy noticeably more productive. Penn Wharton’s budget model, on the other hand, estimates that the net impact of the Democratic bill on the economy, even in the very long run, will be negative. Some provisions, for example, have been found to increase the number of hours Americans spend at work, while others reduce it even further.

The political weakness of the Biden inflation story, apart from its dubious merits, is that it is clearly opportunistic. He says what he says because he thinks many Americans want him to address the rising cost of living. But no one can believe that the Democrats have adopted this plan to reduce inflationary pressures, now or ever. This is not at all what you would imagine if downward pressure on prices were your priority. And it would be an extraordinary coincidence if what the Democrats wanted long before inflation hit turned out to be exactly what the doctor ordered to be cured.

The mismatch between the need to reduce inflation and the Democrats’ spending initiatives raises two awkward questions for the party.

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First, the Biden administration does not have a genuine anti-inflationary agenda. I suspect this is because the Democrats’ instinctive political response to economic problems is to increase demand through subsidies and curb supply through regulation. This is how they approach healthcare, childcare, and higher education, and this tends to yield higher than lower prices.

Targeted deregulation and tariff cuts would ease some of the supply gap, but the administration has shown little interest. More automation of the ports would make them more efficient in the long run, but unions have resisted it, and a bipartisan infrastructure bill signed by Biden on Monday blocks any funding that goes into it. Interest groups and ideology of the Democratic Party are joining together to prevent it from fighting to cut spending.

The second question is why Biden and the Democrats put so much effort into Build Back Better at all. Fighting inflation is an implausible answer. But the Democrats struggled to come up with a better option.

This is in part because the consensus reached by the party is too vague to sustain a convincing explanation. Nearly all Democrats in Congress are united in a desire to increase spending by $ 1.5 trillion or more over the next decade. When it comes to where the money is supposed to be spent, they have different priorities.

It is the strangely unfocused nature of their legislative agenda that made coherent “messaging,” as those surveyed like to say, impossible. Biden could have spent the past five months arguing that paid family leave is a pressing national need and has promised to meet it. But for most of that time, it was unclear whether this would be included in the bill, and if so, whether it would be a serious or symbolic effort. Thus, the discussion of the bill inevitably focused on the price tag.

The truth is, Democrats are not pursuing this spending bill in the spirit of an urgent national goal. They are simply trying to cram as much of the progressive agenda into Congress as possible before the Republicans can end control of it in the next election.

However, this is not the kind of advertisement that the public might like. So we ended up with the president pretending that this bill is his big idea for lowering inflation.

Ramesh Ponnuru is a columnist for Bloomberg Opinion. He is a Senior Editor at National Review and a Visiting Fellow at the American Enterprise Institute.

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