Zandi argues spending packages will help economy, rejects inflation concerns
Mark Zandi, the chief economist of Moody’s Analytics, released a new report on Wednesday that endorsed the bipartisan infrastructure deal and reconciliation package being negotiated on Capitol Hill, concluding that the initiatives would benefit the economy.
“The nation has long underinvested in both physical and human infrastructure and has been slow to respond to the threat posed by climate change, with mounting economic consequences. The bipartisan infrastructure deal and reconciliation package help address this,” Zandi wrote in the report.
“Passage of legislation is far from certain but failing to pass legislation would certainly diminish the economy’s prospects,” he added.
Zandi also rejected claims that the infrastructure proposals will cause inflation to skyrocket and the economy to overheat, writing that they are “overdone.”
“Worries that the plan will ignite undesirably high inflation and an overheating economy are overdone. The fiscal support it provides is only sufficient to push the economy back to full employment from the recession caused by the COVID-19 pandemic,” he wrote.
President Biden last month announced that he and a bipartisan group of senators had reached an agreement on an infrastructure deal.
The specific proposals in the package, which are expected to cost $1.2 trillion over eight years, are still being hashed out. Senators have battled in recent days over how to pay for the provisions.
Democrats separately are putting together a $3.5 trillion budget reconciliation package that will include measures on climate change, child care, care for the elderly and a number of other issues. Republicans oppose that measure and Democrats are hoping to use special budget rules that would prevent the package from being blocked by a filibuster.
Zandi said increased investments in public infrastructure and social programs will “lift productivity and labor force growth, and the attention on climate change will help forestall its increasingly corrosive economic effects.”
He also wrote that the policies being discussed for the packages “would direct the benefits of the stronger growth to lower-income Americans and address the long-running skewing of the income and wealth distribution.”
The White House pushed Zandi’s report after it was released on Wednesday, writing that it “confirms what the President said on Monday: that these sorts of investments in making our economy more productive will keep prices stable and decrease inflationary pressure.”