“strong demand, no question . . . “
Strong demand because people had money to spend when they would have had nothing if the ARP was not put into play. By the same token, the Tax Cuts and Jobs Act was targeting the upper 1% of the taxpayers with the next 4% tagging along. It in itself was ~$2 trillion much of which targeted that small percentage of the taxpayers and reduced the corporate income tax rate to a flat rate of 21 percent, from a previous top rate of 35 percent.
Without Biden’s American Rescue Plan targeting people in the lower income brackets, there would have been far greater issues. Business took advantage during the pandemic. WSJ . . .
“Several of these measures yielded tangible results, but the new macroeconomic policy proved fatal for the administration. The Hewlett report insisted that neoliberalism had hurt workers by focusing on inflation rather than unemployment. Why was it, the report asked, that after a long period of rock-bottom interest rates, inflation was “too low”?
The report asserted:
“If economic developments over the past decade show anything, it is that there is greater headroom for spending without causing undue inflation.” Governments, Hewlett argued, can spend more on efforts to boost demand “without worrying about inflation quite so frantically.”
A few months later, Mr. Biden signed into law the American Rescue Plan, a nearly $2 trillion stimulus package on top of the trillions the Trump administration had spent during the pandemic. Three years later, the consumer-price index showed a 20% overall price increase. The inflation over which the Biden administration presided dramatically undermined Kamala Harris’s electoral prospects.
Some Democratic-leaning economists have argued that inflation was a global, pandemic-induced supply shock on which fiscal stimulus had little or no effect. To his credit, Jared Bernstein, Mr. Biden’s chief economic adviser doesn’t take this easy way out. In a recent interview with the New York Times, he said the inflation of recent years “was exacerbated by strong demand, no question. So I’m not giving fiscal policy a pass.”
The Biden administration’s fiscal stimulus was developed within the intellectual framework that the Hewlett Foundation helped create. In 2021 Mr. Bernstein told the Times that the American Rescue Plan’s purpose was to “run the economy with a little more heat”—that is, to set aside inflationary concerns in favor of faster labor-market gains. “We certainly got more heat than I envisioned at the time,” he now admits, but he adds that 20-20 hindsight was a luxury the administration couldn’t afford during the pandemic.
What about 20-20 foresight, which inflation-wary dissenters such as former Treasury Secretary Larry Summers offered early in 2021? It was the responsibility of the president’s political advisers, and of the president himself, to weigh the risks of pedal-to-the-metal economic stimulus. Mr. Biden should have understood the risks of rising prices: He was already in his second Senate term when inflation undermined President Jimmy Carter’s administration.
Despite presiding over a slow recovery from the Great Recession, President Obama comfortably won re-election. Ms. Harris wasn’t so fortunate. That’s because while unemployment disproportionately affects a portion of the electorate, inflation hits everyone—especially working-class Americans who can’t evade its effects.