White House economists admitted last week that the Biden administration's spending may have increased inflation, months after the president dismissed the notion that his trillion-dollar plans boosted prices as "bizarre."
Biden administration economists concluded in the annual "Economic Report of the President" that past stimulus bills "could have contributed to high inflation" over the last two years. Americans did not immediately spend the money they received from pandemic assistance checks, the economists said, and instead saved some to make large purchases later, which increased demand and prices, potentially bumping up inflation.
"If the drawdown of excess savings, together with current income, boosted aggregate demand, it could have contributed to high inflation in 2021 and 2022," the report found. The main driver of President Joe Biden's spending was the March 2021 American Rescue Plan, which cost $1.9 trillion. Other spending bills passed by the president include the $550 billion Bipartisan Infrastructure Law and the $443 billion Inflation Reduction Act.
The report is evidence of the White House beginning to admit its role in the record inflation seen under the Biden administration, after denying that role for roughly two years. In June, Biden called the idea that his American Rescue Plan increased inflation "bizarre."
"You could argue whether it had a marginal, minor impact on inflation. I don't think it did," Biden said at the time. "And most economists do not think it did. But the idea that it caused inflation is bizarre."
In July 2021, just months after Congress passed the American Rescue Plan, Biden said there was "no serious economist" forecasting inflation.
"There's nobody suggesting there's unchecked inflation on the way—no serious economist," Biden said at the time.
The connection between Biden's spending and inflation is not a new discovery, even for Democrats. Last year, Biden ally and then-House majority whip Jim Clyburn (D., S.C.) said "all of us knew'' inflation was coming after Biden signed his spending bills.
"Let me make it very clear. All of us are concerned about these rising costs, and all of us knew this would be the case when we put in place this recovery program," Clyburn said last April.
The Federal Reserve Bank of San Francisco pointed to Biden's American Rescue Plan as a significant contributor to inflation. At its peak in June 2022, inflation reached a 9 percent annual rate, the highest level in 40 years.
Published under: American Rescue Plan , Economist , Economy , Federal Stimulus , Government Spending , Inflation , Joe Biden , Stimulus