Economic advisers to former President Barack Obama recently criticized President Joe Biden’s spending policies and the administrative handling of growing inflation.
A former economic adviser to Obama, Steven Rattner wrote an op-ed in The New York Times criticizing the Biden administration’s previous and future spending programs and failure to handle the growing inflation.
Growing inflation, which hit a 30-year record during October, is a byproduct of the Biden administration’s spending policies, Rattner wrote. The administration pumped the economy full of money by printing more, government stimulus and cutting interest rates while supply couldn’t keep up.
“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,” Rattner wrote.
“The original sin was the $1.9 trillion American Rescue Plan, passed in March,” Rattner added. “The bill — almost completely unfunded — sought to counter the effects of the Covid pandemic by focusing on demand-side stimulus rather than on investment. That has contributed materially to today’s inflation levels.”
American consumers saw record savings rates due to government payments and reduced spending throughout the pandemic, Rattner said. As the pandemic eased, consumers became more eager to spend the saved money, but supply chain bottlenecks spurred shortages and increased prices.
Biden’s unfunded Build Back Better plan would add to the budget deficit, increasing inflationary pressure, Ratten explained.
“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.”
Additionally, Rattner points to Biden’s infrastructure bill, which includes $550 billion in spending and only $173 billion of additional offsets, as another factor that will drive the price of goods up.
Regarding the Federal Reserve, the central bank needs to raise interest rates faster and speed up its asset purchases to keep inflation at the 2% target.
“Some responsibility for the overstimulating lies with the Federal Reserve, which responded correctly to the onset of the pandemic by cutting interest rates and shoveling money into the financial system. More recently, the Fed has been too slow to curtail its program of buying debt, sending still more money to chase those few goods,” Rattner wrote.
Meanwhile, former Treasury Secretary and Obama economic advisor Larry Summers criticized the Fed and the Biden administration’s handling of inflation.
“After years of advocating for more expansionary fiscal and monetary policy, I altered my view this past winter, and I believe the Biden administration and the Federal Reserve need to further adjust their thinking on inflation today,” Summers wrote in a Washington Post op-ed Monday.
Summers was also on CNN’s “Cuomo Price Time” Thursday, criticizing the White House for being “behind the curve” fighting inflation.
“I think that the policymakers in Washington, unfortunately, have almost every month been behind the curve,” Summers said.
“They said it was transitory; it doesn’t look so transitory. They said it was due to a few specific factors; doesn’t look to be a few specific factors,” Summers added. “They said when September came and people went back to school that the labor force would grow, and it didn’t happen.”
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