This capped a month in which Biden often seemed offended by the notion that piling another $1.9 trillion on top of over $3 trillion in COVID-19 spending signed into law by the previous administration during the pandemic might have helped fuel inflation — as he was warned in advance. He told the Associated Press in June that there was “zero evidence” for this claim.
“You could argue whether it had a marginal — a minor impact on inflation,” he said. “I don’t think it did. And most economists do not think it did. But the idea that it caused inflation is bizarre.”
“I don’t want to hear any more of these lies about reckless spending. We are changing people’s lives,” Biden told an audience of labor union members in Philadelphia around the same time. He cited a lower annual budget deficit than he inherited from former President Donald Trump.
Treasury Secretary Janet Yellen, already on the defensive for telling CNN she had gotten inflation projections “wrong,” had to deny reports she had called for more spending restraint from the Biden administration.
“I never urged adoption of a smaller American Rescue Plan package,” said Yellen, who previously chaired the Federal Reserve.
“Excess federal spending is partly responsible for today’s high inflation, and Trump is just as culpable as Biden,” Chris Edwards, director of tax and budget policy studies at the libertarian Cato Institute, told the Washington Examiner. “Trump signed a massive and excessive $900 billion in new stimulus in December 2020.”
Many economists across the spectrum view Biden’s spending as the straw that broke the camel’s back. “I think we can say with certainty that we would have less inflation and fewer problems that we need to solve right now if the American Rescue Plan had been optimally sized,” Wendy Edelberg, a senior economics fellow at the liberal Brookings Institution, said in a statement.
The Committee for a Responsible Federal Budget’s Marc Goldwein has previously compared it to pouring “gasoline on the fire,” saying, “It was almost written as if we didn’t just pass a trillion-dollar stimulus in December.”
Former Treasury Secretary Larry Summers, once a top economic adviser to Democratic Presidents Bill Clinton and Barack Obama, has warned Biden against “overheating” the economy. Summers is now forecasting a recession.
Biden sought an additional $3 trillion in new spending on a social welfare and climate spending bill that stalled in the Senate late last year. He also signed into law a $1.2 trillion bipartisan infrastructure bill.