Biden is wrong — government spending does not lower inflation

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Biden is wrong — government spending does not lower inflation

Tiana Lowe 4 hrs ago

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Decade-defining inflation is here, and despite the dreams of the Fed and Congress, investors have clearly signaled that they no longer believe it to be transitory. President Joe Biden has repeatedly tried to explain away consecutive months of damning producer and consumer-side inflation increases, but on Wednesday night, the president took a ... shall we say interesting tack in trying to argue that people shouldn't be concerned about inflation, not despite his agenda but precisely because of it.

© Provided by Washington Examiner "Moody’s today went out, Wall Street firm, not some liberal think tank, said, if we pass the other two things I’m trying to get done, we will in fact reduce inflation, reduce inflation, reduce inflation," Biden said during a CNN town hall. "Because we’re going to be providing good opportunities and jobs for people, who, in fact, are going to be reinvesting that money back into all the things we’re talking about, driving down prices, not raising prices."

Using lumber as an example, he also blamed primary inflation on the bottle-necking of resources still waiting for pre-pandemic capacities of the labor force and supply-side processing.
Get that folks? The Biden administration will solve the worst inflation since at least the Great Recession not by tightening the currency but by blowing it out with unprecedented peacetime spending amid more than a decade of near-zero interest rates!
For starters, even if Biden were gambling on people reinvesting wealth into the economy, investors have clearly baked inflation into the market to the detriment of American enterprise, and the administration's push to raise the capital gains tax would further disincentivize investment. And then there's the fact that Biden is just plain lying about what the aforementioned Moody's report claimed. Rather than endorse Biden's proposed spending blowouts, Moody's, while taking a more dovish approach, still said that inflation concerns over spending "cannot be dismissed."
Some of Biden's spending, specifically pieces aimed at businesses, will indeed have a positive return on investment in the short term, and others, such as the temporarily expanded child tax credit, could reap positive benefits in the long run. But breaking market price signals with extended unemployment insurance, persuading workers to stay on the sidelines of the labor force as employers automate those jobs away for good, and playing favorites with particular industries creates a fundamental inflation problem on top of the already ripe conditions for inflation thanks to more than a decade of Fed policy and bipartisan spending bonanzas. No amount of Bidenisms can explain those realities away.
Tags: Opinion, Beltway Confidential, Inflation, Joe Biden
Original Author: Tiana Lowe
Original Location: Biden is wrong — government spending does not lower inflation

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