Another Democrat economist jumps ship on Biden's inflationary spending
Just as the Congressional Budget Office looks all set to present some very bad numbers about Joe Biden's porkulus social spending plan that Joe claims is "paid for," another Obama-era Democrat economist has bailed on the Biden plan, warning it's not "paid for" and will throw fat on the fire of inflation:
From a pillar of the Democratic party establishment, quote: "How could an administration loaded with savvy political and economic hands have gotten this critical issue so wrong?" https://t.co/GZplvQRITk— Brit Hume (@brithume) November 17, 2021
Steven Rattner, who served as counselor to the Treasury secretary during President Obama's administration, begins his New York Times piece with exasperation at all the Biden gaslighting:
Enough already about “transitory” inflation. Last Wednesday’s terrible Consumer Price Index news shifts our inflation prospects strongly into the “embedded” category: Prices are up 6.2 percent from a year ago, the largest increase in 30 years.
While not likely to morph into the double-digit inflation I covered for The New York Times four decades ago, prices may well rise fast enough to trigger higher interest rates. Higher financing costs make it more expensive for consumers and businesses to borrow, which, in turn, throttles growth.
And yes, he actually understands why:
How could an administration loaded with savvy political and economic hands have gotten this critical issue so wrong?
They can’t say they weren’t warned — notably by Larry Summers, a former Treasury secretary and my former boss in the Obama administration, and less notably by many others, including me. We worried that shoveling an unprecedented amount of spending into an economy already on the road to recovery would mean too much money chasing too few goods.
He even explains the political dynamics of the coming fiasco, perfectly accurately:
The administration wanted to claim a big policy win ahead of the 2022 midterm elections. But inflation worries are top of voters’ minds.
So the administration should come clean with voters about the impact of its spending plans on inflation. Build Back Better can be deemed “paid for” only if one embraces budget gimmicks, like assuming that some of the most important initiatives will be allowed to expire in just a few years. The result: a package that front-loads spending while tax revenues arrive only over a decade. The Committee for a Responsible Federal Budget estimates that the plan would likely add $800 billion or more to the deficit over the next five years, exacerbating inflationary pressures.
Mr. Biden also insists that the much-lauded infrastructure bill he just signed is fully paid for — but it isn’t. Indeed, the infrastructure figures show $550 billion in new spending and just $173 billion of additional offsets.
Being a Democrat, he naturally thinks the solution is tax hikes instead of just scrapping the entire Goliath plan. But the fact remains: Government spending fuels inflation and there's already too much of it already, that's Economics 101 and Rattner refuses to argue with it.
He also notes that he's hardly the first to warn about this economic iceberg the money-burning ship U.S.S. Joe Biden is heading straight into. Former Obama Treasury Secretary Larry Summers cast his aspersions on the disaster earlier in the Washington Post. Both note the godawful impact on inflation on Joe's runaway government spending, and Rattner notes Joe's previous porkulus packages that are still coursing through the system aren't finished yet, yet we can already see what they have brought us: the current round of inflation, with $7 gas in California. Biden's $1-plus trillion social spending plan with its subsidized government daycare, its $10 billion in cash handouts to illegal aliens, and its green new deal cronyist spending will only add to the runaway inflation currently on offer.
He had to say that, same as Summers did, because it's going to happen no matter what he says, and being an economist of sorts, he recognizes that he's still got a reputation to defend. He, and Summers, and apparently many Obama economists who never made the kinds of messes Joe Biden is making, see value in distancing themselves from the coming inflation disaster. They don't want Biden's mud all over them as the problem inevitably shakes out. Some economists, such as Paul Krugman, don't really care that they are always getting it wrong as they chase clowns like Joe Biden and his ignorant notions of economics. But real economists do.
Leading economists unaligned to the Democrat agenda or even the Obamatons, such as Johns Hopkins University Professor Steve Hanke and Invesco of London top economist John Greenwood have already laid down what's happening, explaining in plain English for the Wall Street Journal's op-ed page that the "monetary bathtub is overflowing." They lay it out in baby English anyone can understand at the beginning, and then show with a wallop what's for certain to happen:
Let’s take a look at the U.S. bathtub. During the early months of the Covid-19 pandemic, the faucet was wide open. Between December 2019 and August 2021, the U.S. money supply, measured by M2, grew by $5.5 trillion, a stunning 35.7% increase in only a year and a half, driven primarily by the Fed’s purchases of Treasurys and mortgage-backed securities. In light of anticipated Federal Reserve tapering, we estimate that by the end of 2024 the money supply will grow another $5.1 trillion.
Out of the total $10.6 trillion in new money, real GDP growth will drain roughly $1.4 trillion. Another $1 trillion will flow down the money demand drain. Since the amount of money flowing into the bathtub far exceeds the two outflows, the excess money in the tub—around $8.2 trillion—will hit the inflation overflow drain.
The huge monetary expansion—$5.5 trillion already in the bathtub—is starting to reach the overflow. Persistent, not transitory, inflation will be with us for the next two to three years.
Descriptions like that can't be ignored and they don't even amount to forecasts, they describe actual monetary and fiscal behavior as it has been studied over decades.
Those are the kinds of economists that Obama-linked economists such as Summers and Rattner likely don't want to become laughingstocks around by touting Joe's inflationary spendathon fantasies. Those kinds of economists amount to their academic peers, and they don't want to look like idiots in their presence, because they are persistently right.
That may well be why any economist who wants to maintain respect is now speaking out against Joe's spending plans. They have to if they don't want to look like morons when what happens, happens. That list includes Democrats.
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