As Democrats celebrate first anniversary of $1.9T Biden stimulus bill, inflation hits 40-year high
Many economists believe the American Rescue Plan supercharged inflation.
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Democrats are celebrating the one-year anniversary of President Biden's stimulus bill, which some economists say supercharged inflation. The milestone arrives at an awkward moment for the administration, as the Bureau of Labor Statistics released monthly consumer price data Thursday showing inflation has surged to its highest level in four decades.
Biden signed the bill on March 11, 2021.
According to the latest data, released on Thursday, the Consumer Price Index rose 7.9% in the past 12 months, marking a 40-year high for inflation. For comparison, prices rose 1.7% during the 12 month period ending in February 2021.
Despite inflation rising to record levels since the passage of Biden's $1.9 trillion American Rescue Plan, Democratic leaders describe the bill as a success and slam Republicans for not voting in favor of it.
"That was legislation that was absolutely necessary for families across our country, and it's important to remember that not one, not one Republican voted for it," Michigan Sen. Gary Peters, chair of Democratic Senatorial Campaign Committee, told reporters Thursday.
Democratic National Committee Chairman Jaime Harrison also noted that the ARP failed to receive any Republican votes. Neither Peters nor Harrison addressed the argument that the large-scale stimulus bill fueled inflation.
"Let's not forget that exactly one year ago, it was President Biden and Democrats and not a single Republican in the House, not a single Republican in the Senate, who passed the American Rescue Plan," Harrison said. "And we got millions of Americans vaccinated, which led to a historic economic recovery, to get 7 million more Americans back to work and 99% of all of our schools reopen."
The legislation included an expansion of the child tax credit, which allowed families without income to qualify for the first time. It also included an extension of federal jobless benefits on top of state payments and billions in funding for state and local governments.
Republicans have argued that the continuation of the federal unemployment payments contributed to a labor shortage in several sectors of the economy like the restaurant business. GOP leaders have also been outspoken about the roughly $80 billion in fraudulent federal jobless payments that were made during the pandemic.
The White House Council of Economic Advisors has predicted that inflation will continue to rise in the coming months given that the Russian invasion of Ukraine is escalating.
"There has been substantial run-up in energy prices since February resulting from the Russian invasion of Ukraine," the council wrote on Twitter. "Energy and commodities prices will likely contribute substantially to inflation in the coming months."
Democrats in Congress used budget reconciliation to move the bill to passage without relying on any votes from Republicans.
The DNC is holding several events to celebrate the ARP's passage.
The Michigan Democratic Party held a press conference on the steps of the Michigan State Capitol with Michigan Democratic House Leader Donna Lasinski and other local leaders to "highlight the benefits of Democrats' American Rescue Plan and call out Republicans' plan to hike taxes and raise premiums for Michiganders." The reference is to Florida Sen. Rick Scott's tax plan, which has drawn criticism from the White House and some Republicans.
According to the DNC, metro Atlanta city and county officials held an "in-person press conference to celebrate the one-year anniversary of President Biden signing the American Rescue Plan into law" on Thursday.
There has been no shortage of voices warning of the inflationary effects of the stimulus, both before its passage and since.
Olivier Blanchard, former chief economist for the International Monetary Fund, said ahead of the bill's passage that he was worried "if we spend $1.9 trillion, then we are going to increase demand by so much that we'll get overheating."
Larry Summers, former Clinton Treasury Secretary, was another economist who warned that the ARP could lead to rising inflation.
Steven Rattner, former Obama administration counselor to the secretary of the treasury, also warned about the inflationary effect of passing the ARP. Rattner has also been critical of the Biden Administration blaming the supply chain crisis for the nation's inflation woes.
A Federal Reserve Bank of San Francisco analysis from October found that the ARP was boosting inflation albeit temporarily.
Some observers have said higher product and service prices are likely not coming back down in the future.
Other experts say whether prices eventually come back down depends on the product.
According to the Bipartisan Policy Center, the "federal government ran a deficit of $2.8 trillion in fiscal year 2021, the difference between $4.0 trillion in revenues and $6.8 trillion in spending." The BPC found that the FY2021 deficit was "almost three times that of FY2019."