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Psaki: “Many Many” Economists Think Biden’s Build Back Better Bill Will Address Inflation–But Some Disagree

Photo is obtained on Flickr at The US Department of State. The photo is public domain, seen at the aforementioned link.

On that same point though, just politically, do these numbers make it more challenging, you think, to pass Build Back Better, given the fact that opponents and Manchin argue that pouring more money into the economy only make thinks worse?” a reporter asked White House press secretary Jen Psaki at a briefing December 10, 2021. Pskai, appealing to authority, made the following statement: “Well, what we know is what 17 Nobel economists, lauderate econnomists, have conveyed. Which is that this will help address inflation. We know that economists across the board, many many across the board, have conveyed that this will help address what we see as rising costs …

The concerns of inflation the reporter brings up come off of the latest CPI report released by The Bureau of Labor Statistics. Inflation for The United States has hit a 40-year all time high of 6.8%–virtually all commodities are seeing rising prices. Biden’s Build Back Better agenda was publicized before much of the inflation occurred, though now the administration has re-branded the bill to address the public’s rising concern.

According to The White House press secretary, there’s a consensus among economists that Biden’s bill will provide inflation relieve. She’s made similar claims before by appealing to consensus opinion.

However, it isn’t as plain as Psaki makes it.

The Committee For A Responsible Federal Budget published a report last month that paints a different picture. The committee admits the bill is “theoretically ambiguous” because, as it stands, there are deflationary attributes coupled with inflationary ones. Yet, they think the bill leans towards a more inflationary nature. The bill front-loads costs, attempting to offset the cash injection by investing more in the future. According to the committee this would increase inflation in the short-term, “However, in our assessment, the very front-loaded and relatively progressive nature of Build Back Better means that it is more likely to be inflationary in the short term.” the introduction of the report reads. Though they predict the inflation is temporary it comes with “undesirable risk” that could influence a “… possible inflationary spiral in a time of already high inflation“.

Dr. John Leahy is the Allen Sinai Professor of Macroeconomics at Michigan University, and his thoughts are more firm. Dr. Leahy provided comment for PolitiFact with “An increase in government spending should increase demand and thereby increase inflation. This will happen even if the spending is fully paid for through taxes, since the government spending increases demand one for one and the taxes reduce demand only to the extent that firms or consumers reduce their spending as a result, and this reduction is typically less than one for one.” Biden claims the bill costs 0$ USD and won’t add a penny to the national debt. But, that claims doesn’t jive with the Congressional Budget Office, who just released a report stating that the bill will increase the deficit by 3.0 trillion dollars. University of Pennsylvania Penn Wharton holds a similar view.

PolitiFact talked to others as well. “I’m an economist, and I disagree … We know there’s lots of spending in the bill, and that it’s front-loaded.” said the president of American Action Forum, Douglas Holtz-Eakin. It seems the front-loading Biden’s bill proposes isn’t a popular strategy when considering the nation’s current inflation and debt.

You should wind up with primarily a deficit-financed spending bill that is going to be rolled out in an economy near full employment … It will make the labor market even hotter and create even more price pressure.” Bank of America’s head of global economics researcher Ethan Harris also cited the front-loading. Indeed, the consensus of Build Back Better is not one-sided.

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