Claim: The Biden administration's $1.9 trillion stimulus package was not the "real cause" of inflation, as prices in the United States did not spike "higher than anyone else."
Who said it: Heather Boushey, an economic adviser to President Joe Biden, during a Monday sit-down with CNBC. Boushey argued that Biden's American Rescue Plan couldn't have been the "real cause" of inflation because prices in the United States did not rise higher than "other countries that did not have the same policies." Instead, Boushey said, the "global pandemic" caused equal inflation in the United States and abroad.
Why it matters: Sky-high inflation meant the average U.S. household in 2022 had to spend an extra $8,600 in typical household expenses, according to an estimate from Joint Economic Committee Republicans. Biden's reelection chances in 2024 will in large part hinge on the president's ability to convince voters that the American economy is nonetheless thriving—or at least that the nation's economic woes are not the administration's fault. Just one in three U.S. adults approve of Biden's handling of the economy, according to an Associated Press poll published in June.
Context: Biden and his top officials have long balked at Republican criticisms that American Rescue Plan spending caused consumer prices to rise. Instead, they argue, corporate greed and pandemic-driven supply chain disruptions were the "real" catalysts. After Democrats passed the plan in March 2021, Biden repeatedly dismissed claims that the stimulus spending raised consumer prices. "There's nobody suggesting there's unchecked inflation on the way—no serious economist," Biden said in July 2021. Nearly a year later, Biden told the Associated Press, "The idea that [the American Rescue Plan] caused inflation is bizarre."
Analysis: Prior to the American Rescue Plan's passage, Biden's own Treasury secretary, Janet Yellen, urged administration officials to scale back the bill over fears it would exacerbate inflationary pressures. Economist Larry Summers, who served in both the Clinton and Obama administrations, echoed Yellen's concerns. Summers questioned the American Rescue Plan's size and later called the measure the "least responsible macroeconomic policy" in decades.
"There is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels," Summers wrote in a February 2021 column for the Washington Post, "will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability."
During the 2008 recession, the Obama administration provided around 55 million Americans with roughly $13.75 billion in direct payments. Meanwhile, the American Rescue Plan provided around 168 million Americans with approximately $401.5 billion in direct stimulus payments. Once that spending set in, core inflation in the United States skyrocketed, prompting members of Biden's own party to acknowledge the plan's inflationary impact. During a June 2021 town hall, Rep. Kim Schrier (D., Wash.) said Biden's stimulus spending resulted in "a lot more people buying things," which she said would "cause prices to go up." In October, meanwhile, then-House majority whip Jim Clyburn (D., S.C.) said that "all of us knew" the stimulus spending would lead to "rising costs."
"Any time you put more money into the economy, prices tend to rise," Clyburn said.
Boushey's argument that America's inflation did not exceed price hikes seen in other nations also falls flat. A March 2022 report from economists at the Federal Reserve Bank of San Francisco found that U.S. core inflation from early 2021 onward grew at a higher rate than the average price hikes seen in nine other wealthy countries, including France, Germany, Canada, and the United Kingdom. "These differences in inflation readings cannot be explained by measurement issues," the report said. It went on to argue that "fiscal support measures," such as the American Rescue Plan, "may have contributed to this divergence by raising inflation about 3 percentage points by the end of 2021."
Printing money leads to inflation—and everyone knows it.