WASHINGTON – Sen. Joe Manchin always said inflation would be his guide in deciding on the massive Build Back Better bill.
Now, a new report on inflation says it will stay with us for much longer than anticipated, further calling into question by some the addition of trillions more in federal spending.
The December 2021 NABE Outlook by the National Association for Business Economics says the survey panelists have significantly ramped up their expectations for inflation since September.
Cornyn
“The core consumer price index, which excludes food and energy costs, is now expected to rise 6.0 percent from the fourth quarter of 2020 to the fourth quarter of 2021, compared to the September forecast of a 5.1 percent increase over the same period,” NABE Vice President Julia Coronado said. “Nearly three-fourths of respondents — 71 percent — anticipate that the Federal Reserve's preferred gauge of inflation, the change in the core PCE price index, will not cool down to or below the Fed’s target of 2 percent year-over-year until the second half of 2023 or later.“
Survey chairwoman Yelena Shulyatyeva said two-thirds of the panel expect wage increases will keep inflation elevated over the next three years.
In September, Manchin (D-W.Va.) raised concerns about how the Biden administration’s $1.7 trillion Build Back Better bill would affect the economy, the national debt and inflation.
“The nation faces an unprecedented array of challenges and will inevitably encounter additional crises in the future,” he wrote in a September 2 opinion piece for the Wall Street Journal. “Yet some in Congress have a strange belief there is an infinite supply of money to deal with any current or future crisis, and that spending trillions upon trillions will have no negative consequence for the future. I disagree.
“An overheating economy has imposed a costly ‘inflation tax’ on every middle- and working-class American. … Now Democratic congressional leaders propose to pass the largest single spending bill in history with no regard to rising inflation, crippling debt or the inevitability of future crises. Ignoring the fiscal consequences of our policy choices will create a disastrous future for the next generation of Americans.”
Manchin said Congress needs “a strategic pause on the budget-reconciliation legislation.”
“A pause is warranted because it will provide more clarity on the trajectory of the pandemic, and it will allow us to determine whether inflation is transitory or not,” he wrote. “While some have suggested this reconciliation legislation must be passed now, I believe that making budgetary decisions under artificial political deadlines never leads to good policy or sound decisions. I have always said if I can’t explain it, I can’t vote for it, and I can’t explain why my Democratic colleagues are rushing to spend $3.5 trillion.
“Another reason to pause: We must allow for a complete reporting and analysis of the implications a multitrillion-dollar bill will have for this generation and the next. Such a strategic pause will allow every member of Congress to use the transparent committee process to debate: What should we fund, and what can we simply not afford?”
Manchin says inflation is a serious issue.
“Inflation continues to rise and is bleeding the value of Americans’ wages and income,” he wrote. “Our economy, as the Biden administration has correctly pointed out, has reached record levels of quarterly growth. …
“I believe that spending trillions more dollars not only ignores present economic reality, but makes it certain that America will be fiscally weakened when it faces a future recession or national emergency.”
Manchin’s office declined further comment for this story, but he also said in August he had "serious concerns about the grave consequences facing West Virginians and every American family if Congress decides to spend another $3.5 trillion."
“Over the past year, Congress has injected more than $5 trillion of stimulus into the American economy – more than any time since World War II – to respond to the pandemic," Manchin said. "The challenge we now face is different: millions of jobs remain unfilled across the country and rising inflation rates are now an unavoidable tax on the wages and income of every American. These are not indications of an economy that requires trillions in additional spending.
"Every elected leader is chosen to make difficult decisions. Adding trillions of dollars more to nearly $29 trillion of national debt, without any consideration of the negative effects on our children and grandchildren, is one of those decisions that has become far too easy in Washington.
“Given the current state of the economic recovery, it is simply irresponsible to continue spending at levels more suited to respond to a Great Depression or Great Recession – not an economy that is on the verge of overheating. More importantly, I firmly believe that continuing to spend at irresponsible levels puts at risk our nation’s ability to respond to the unforeseen crises our country could face. I urge my colleagues to seriously consider this reality as this budget process unfolds in the coming weeks and months.”
Other Democrats also have voiced concerns about federal spending and inflation. Different studies have shown the true cost of the BBB bill to be anywhere from $2.4 trillion to, as the Committee for a Responsible Federal Budget predicts, almost $5 trillion. The New York Times has estimated the true cost to be about $4 trillion.
“Budget experts say true cost of legislation could be $4 trillion as lawmakers rely on sleights of hand to bring down the price tag,” the Times wrote.
And last month, Republican Sen. John Cornyn of Texas requested a score on the Build Back Better Act from the Joint Committee on Taxation and the Congressional Budget Office for 10 years of spending.
“While some public officials have said that the legislation will not increase the federal deficit by a single cent, I am concerned that the CBO score of H.R. 5376 is artificially low because of a number of timing gimmicks,” Cornyn wrote. “Specifically, the legislation includes a number of arbitrary sunsets and expirations of several expensive programs, which disguises the true cost of making these policies permanent.”
“At a time when government spending and debt continue to grow at an unsustainable rate, the American people deserve more than smoke-and-mirror accounting from Washington, D.C. They deserve a full and complete picture of the fiscal impact of H.R. 5376, which will dramatically expand and alter the federal budget for the foreseeable future.”
Other Republicans are concerned as well.
“Democrats’ big government tax and spending spree is going to bankrupt our country and drive prices even higher,” National Republican Congressional Committee spokesman Mike Berg said last month. “Voters will punish any Democrat who supports this big government boondoggle.”
Also last month, former White House economist Steve Moore said he thinks a major reason for inflation right now is overspending by the Biden administration.
“We're reopening businesses, everything had been shut down last year, so there's some natural inflation, but I think a major factor, clearly is this massive, multi-trillion dollars of spending that's happening under the Biden administration,” Moore told The National Desk. “We're shoving all this new money into the economy right now. It is making inflation worse. So I am worried about it.
“The polls are showing now that Americans are very concerned about the fact that prices are rising faster than their income. So incomes are up 4 percent, but prices are up by 6 percent. That means you're losing ground.”
Moore said inflation is “just a killer” historically. He said he’d tell Biden to not pass another bill until inflation is under control.
“People will get very angry, antagonized, when they have to pay more at the gas pump and when they pay more for food, and all the other things they need to buy,” Moore said. “So if I were advising Joe Biden, I'd say, ‘Look, you've got to get this inflation under control.”
Moore also said he agreed with a November 10 tweet by Manchin. That tweet said, “By all accounts, the threats posed by record inflation to the American people is not ‘transitory’ and is instead getting worse. From the grocery store to the gas pump, Americans known the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.”
On December 6, Bloomberg reported that economists are ratcheting up their U.S. inflation forecasts through 2022 as supply chain constraints persist and price pressures expand.
Bloomberg said the consumer price index will grow 5.8 percent at the end of the fourth quarter compared to one year before. Last month, that estimate was 5.5 percent. In addition, consumer prices forecasts are expected to increase through the end of 2022.
“Rising employment costs suggest the risks are skewed towards higher for even longer on inflation, together with the fact a record proportion of companies expect to raise their prices further in the coming three months,” said James Knightley, chief international economist at ING, said in the Bloomberg report.