Simply put, inflation occurs when there is too much money chasing too few goods. In the last 15 months, federal spending on COVID-19 relief totaled $5.9 trillion, a quarter of U.S. GDP. This level of spending, paired with the Biden administration’s unwise fiscal and regulatory agenda, poses risks to our economy in the long run and is a wrong-headed approach at the onset of recovery from the pandemic.
Since the beginning of the Biden administration, economists and analysts of all stripes warned of inflation risks from the $1.9 trillion American Rescue Plan. Larry Summers, who served as President Clinton’s Treasury secretary and crafted the Obama stimulus, estimated the American Rescue Plan was three times larger than the pandemic’s economic gap, warning of inflationary pressures not seen in a generation. Earlier this year, the nonpartisan Congressional Budget Office projected GDP at pre-pandemic levels and declining unemployment without additional stimulus. Nevertheless, the Biden administration insisted this level of spending was warranted and inflation concerns were irrelevant.
Now, the full impact of this influx of government spending is beginning to manifest itself as a tax on every American family. In April, consumer prices rose 4.2 percent, the highest rate since the 2008 financial crisis. As prices rise, the value of hardworking Americans’ savings and retirement accounts declines, leaving those on a fixed income feeling squeezed. The Biden administration went headlong in pursuit of what Mr. Summers calls “the least responsible fiscal macroeconomic policy we’ve have had for the last 40 years.” Now, Americans are paying the price.
Undeterred by the data, the Biden administration shows no sign of letting up, proposing a $6 trillion budget for this year that puts our country on a path to a record level of debt in 2021. A key component of this plan is a so-called infrastructure package, less than 8 percent of which goes toward improving roads, bridges, airports and waterways. The vast majority of this proposal is slated to go toward electric vehicle subsidies, expanding Medicaid, and Green New Deal mandates. To pay for it, the Biden administration hopes to raise taxes and eliminate the Trump-era tax cuts for small businesses and families that spurred the strongest economy of our lifetimes.
Alongside this tax and spend wish list, the Biden administration is advocating for a $1.7 trillion expansion of taxpayer-funded social welfare programs. An analysis by the Penn Wharton Budget Model indicates the burden of debt from the American Families Plan would outweigh any potential benefit and would actually reduce economic output. Even the White House’s own budget projects tepid private sector growth for the next decade.
These effects are not abstract: the burden of corporate tax increases will fall on workers in the form of lower wages, fewer jobs and higher prices. The president’s energy plan ensures higher utility bills for homeowners and lost jobs in energy-producing states like Pennsylvania. Already, U.S. Steel has cancelled a planned expansion in western Pennsylvania and Ford has cancelled plans to build a new electric vehicle in Ohio, instead shifting production to Mexico. The reality is that the Biden agenda grows government rather than spurring economic growth.
If this feels all too familiar, that’s because it is. These failed policies exported jobs overseas and jacked up prices in the 1970s under President Carter and gave us a long and jobless recovery during the Obama-Biden administration. The pro-growth agenda before the pandemic, on the other hand, brought declining unemployment and poverty rates, a domestic investment boom, and wages that grew fastest for the lowest earners. This can be a Great American Decade if we unleash the power of American innovators and entrepreneurs, but we can’t do that under the yoke of excessive spending, higher taxes and runaway inflation. We must grow opportunity in America, not government.
Rep. Dan Meuser (R-Pa.) is a member of the House Small Business Committee.