President Biden brushed off government data showing the highest inflation in 39 years Friday, arguing that the declining value of the US dollar means that Congress should pass his $2 trillion social and environmental spending bill.
“For anyone who, like me, is concerned about costs facing American families, passing [the Build Back Better Act] is the most immediate and direct step we can take to deliver,” Biden said in a statement.
But the monthly Consumer Price Index update is likely to have the opposite political effect after showing that prices for goods and services jumped 0.8 percent from October to November and 6.8 percent over the previous 12 months.
Republicans and centrist Democrats cite soaring costs as the reason not to pump more money into the economy.
But Biden argued that “the challenge of prices underscores the importance that Congress move without delay to pass my Build Back Better plan, which lowers how much families pay for health care, prescription drugs, child care, and more.”
The Congressional Budget Office says the bill would add $367 billion in unfunded spending, potentially worsening inflation. Biden argues that it would lower the cost of living, particularly for people with children, thanks to extending a child tax credit increase and new subsidies for child care and universal preschool for 3- and 4-year-olds.
The House passed the sprawling bill last month with a $2.2 trillion price tag — but if it ever passes the evenly divided Senate it’s expected to shrink in size.
Moderates including Sens. Joe Manchin (D-WV) and Kyrsten Sinema (D-Ariz.) express reservations about the bill and Manchin reportedly told colleagues he doubts the bill will pass this year. A single Democratic vote in the Senate can doom the package.
Manchin has expressed concern about the bill adding to inflation and has slammed what he calls budget gimmicks to make the cost of new programs seem lower than they actually are.
“The unknown we’re facing today is much greater than the need that people believe in this aspirational bill that we’re looking at, and we’ve got to make sure we get this right,” Manchin said Tuesday. “We just can’t continue to flood the market, as we’ve done.”
Manchin said last month that Democratic defeats in Virginia’s gubernatorial and legislative elections reflected alarm about inflation and added that he wanted to tap the breaks on new spending.
“When you look at southwestern Virginia and you saw the returns from southwest [Virginia], that’s my entire state — so these are people I talk to all the time. And I knew what they were concerned about. They’re concerned about inflation, high costs making it more difficult for them,” Manchin said. “I think they spoke loud and clear at the voting booth. And I hope everybody listens.”
But Biden argued Friday that much of inflation was to blame on the COVID-19 pandemic and supply chain bottlenecks and he pointed out that gas prices recently declined.
“Half of the price increases in this report are in cars and energy costs from November. Since then, we have seen significant energy price reductions,” Biden said.
Bracing for the bad news, top White House economist Brian Deese said Thursday that the monthly inflation number would be “backward-looking” because of changes in gas prices.
Jared Bernstein, another White House economist, said Friday in a Fox News interview that “we are doing everything we can to get to the root of this, to ameliorate some of the snarls in the supply chains, to help make sure that American family budgets are able to keep up with these dynamics.”
“The urgency of passing Building Back Better is absolutely at the top of this president’s agenda in no small part because it directly relieves costs to American working families,” Bernstein added.
“The Building Back Better plan has no impact on the kind of inflation we’re talking about right now. It doesn’t make it better, it doesn’t make it worse,” he went on. “What it does is, it eases long-term inflationary pressure — this is widely agreed upon — by increasing the economy’s productive capacity, by helping people find a way into the labor market, by lowering families’ costs for child care, for prescription drugs, for housing.”
But Bernstein also pushed a dubious White House talking point that people’s incomes are up even accounting for inflation, which is technically true but only if accounting for government subsidies included in a $1.9 trillion COVID-19 stimulus bill that passed in March.
“If you actually look at people’s incomes, they’re about $100 per month above where they were a year ago, and that has a lot to do with both the strong labor market and many of the relief measures that this president has signed into law,” he said.
But because of high inflation, the value of earnings from employment actually is down.
The Bureau of Labor Statistics reported Friday that “[r]eal average hourly earnings for all employees decreased 0.4 percent from October to November, seasonally adjusted… This result stems from an increase of 0.3 percent in average hourly earnings combined with an increase of 0.8 percent in the Consumer Price Index.”
Rising inflation has contributed to Biden’s plummeting approval ratings.
Biden last month signed a $1.2 trillion bipartisan infrastructure bill that the CBO said included $256 billion in unfunded spending — though Biden argued that the legislation would ultimately lower inflation by improving the transportation of goods.
The pending bill includes $555 billion for environmental programs, $400 billion to fund universal preschool and cap child care costs at 7 percent of income for most families and $200 billion to extend the enhanced child tax credit for families that earn up to $150,000 — from $2,000 to $3,000 per child, or $3,600 for those under six.
The plan also includes $150 billion for home health care for the elderly and people with disabilities through Medicaid, $150 billion for housing including 1 million new “affordable” rental units, $130 billion in new Obamacare subsidies, $90 billion in racial and gender “equity” initiatives, $40 billion for higher education grants and $35 billion to expand Medicare to include the cost of hearing aids.
The bill would increase from $10,000 to $80,000 the “SALT cap” on state and local taxes that can be deducted from federal taxes — costing an estimated $300 billion in lost federal revenue. The change was pushed by New York-area representatives but is opposed by leftists led by Sen. Bernie Sanders (I-Vt.).
Another $206 billion in the bill would federally subsidize four weeks of paid private-sector family leave — an item that is opposed by Manchin.