President Joe Biden has said Democrats’ “Build Back Better” legislation will reduce inflation. This spin is not only convincing. It underscores the absurdity of the Democrats’ political project.
The first weakness of Biden’s argument is that the timing is completely wrong. On November 10, the White House issued a prepared statement from Biden, claiming that “17 Nobel laureates in economics have said that my plan will ‘ease inflationary pressures’.”
What they actually said is that it will “ease the long-term inflationary pressures.” Several of these economists say Biden’s spending plans targeting climate change, education, childcare, housing and many other social programs will increase inflation by 2022 by pumping more money into the economy. Any downward pressure on prices would come later as productivity rises in response to new federal investment in people and infrastructure.
But it is the inflation that is already happening that has worried the Americans, which is certainly the reason why the White House erased the economists’ inconvenient qualifying struggle. Although this inflation outbreak has lasted longer than many economists thought it would, it is still expected to decline over time – whether Biden gets the bill he wants or not – as the pandemic subsides and supply chains rebuild. Market-based projections of inflation have moved a lot this year, but have consistently shown higher figures for the next five years than for the five after that.
Even economists’ long-term prediction is open to question. This presupposes that the legislation will succeed in making the US economy significantly more productive. The Penn Wharton Budget Model, on the other hand, estimates that the net effect of the Democrats’ bill on the economy, even in the very long term, will be negative. It notes that some regulations will increase the number of hours Americans spend at work, for example, but others will reduce it even more.
A political weakness of Biden’s inflation history, beyond its dubious benefits, is that it is openly 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 the Democrats adopted this plan to reduce inflationary pressures, now or ever. This is not at all what you would come up with if it was your priority to put downward pressure on prices. And it would be an extraordinary coincidence if what the Democrats wanted, long before inflation developed, happened to be exactly what the doctor ordered to cure it.
The mismatch between the need to bring inflation down and the Democrats’ spending initiatives raises two unpleasant questions for the party.
The first is why the Biden administration does not have a genuine anti-inflation agenda. I suppose this is because the Democrats’ instinctive political response to economic problems is to increase demand through subsidies and limit supply through regulation. This is how they approach health care, childcare and higher education, and it tends to produce higher rather than lower prices.
Targeted deregulation and tariff reduction would alleviate some supply shortages, but the administration has not shown interest. More port automation would improve their efficiency in the long run, but unions have opposed it, and the two-part infrastructure law that Biden signed on Monday is blocking any means of going to it. The Democratic Party’s interest groups and ideology together prevent it from fighting to reduce costs.
The second question is why Biden and the Democrats have put so much of their effort behind Build Back Better in the first place. Fighting inflation is not a plausible answer. But Democrats have struggled to formulate a better one.
In part, this is because such a consensus as the party has had is too vague to maintain a convincing explanation. Almost every Democrat in Congress has united in wanting to increase spending by $ 1.5 trillion or more over the next decade. When it comes to what the money is to be used for, they have prioritized differently.
It is the strangely unfocused nature of their legislative agenda that has made coherent “messages,” as the Poles would like to say, impossible. Biden could have spent the last five months arguing that paid family leave is a screaming national need and promising to meet it. But for much of that time, it was unclear whether the bill would include it, and if so, whether it would be a serious or symbolic effort. It is therefore inevitable that the discussion on the bill has focused on the price tag.
The truth is, Democrats are not pursuing this expense bill in the spirit of meeting an urgent national goal. They are just trying to cram as much of the progressive agenda as they can get through Congress before Republicans can end their control of it at the next election.
However, this is not the kind of advertising pitch that is likely to affect the public. And then we ended up with the president pretending that this bill is his big idea to whip inflation.
Ramesh Ponnuru is a Bloomberg Opinion columnist. He is a senior editor at the National Review and a visiting fellow at the American Enterprise Institute.
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