When lawmakers try to sell a piece of legislation to the public, they often tout the immediate need it will fill for ordinary Americans.
There is some discussion of urgency as the Biden administration hopes its social spending package – the $1.75 trillion Build Back Better (BBB) Act – crosses the finish line in the coming weeks. (The House of Representatives passed the measure in a 220-213 vote on Friday.) But now, in light of heightened concerns over inflation, lawmakers are also careful to stress how provisions of the BBB will roll out over many years.
Some parts of the bill are "not a quick hit... it's not a one-time drop of money that's going to lead to inflation,” Heather Boushey, member of President Biden's Council of Economic Advisers, said in an interview with Yahoo Finance. (The bill, for example, contains around $100 billion distributed over three years in childcare investments.) “In fact, quite the opposite, and economists across the spectrum have been in agreement on this,” she said.
Speaker of the House Nancy Pelosi (D-CA) presides over the vote for the Build Back Better Act at the U.S. Capitol on Friday. (Anna Moneymaker/Getty Images) ·(Anna Moneymaker via Getty Images)
“The big pieces of Build Back Better are about long-term investments, they're about productivity growth and it's about improving labor supply,” Boushey said, pointing to changes it will make “to keep our economy strong and prices contained for years to come.”
Investments ‘over 10 years’
Others have made similar points. Rep. Don Beyer (D., Va.), who serves as chair of the Joint Economic Committee in Congress, used his time touting the bill Thursday to note the “long-term structural benefits for our economy.” Rep. John Yarmuth (D., Ky.), chair of the House Budget Committee, said the act “makes historic investments over 10 years.”
White House Chief of Staff Ron Klain even retweeted overnight of a message from comedian Paula Poundstone making the same point.
The emphasis on a long timeframe comes after a week where inflation – and the Biden economic agenda’s role in it – has been center stage. On Monday, at an event put on by Yahoo Finance and the Bipartisan Policy Center, the head of Congress’s nonpartisan budget watchdog said the $1.9 trillion American Rescue Plan (ARP), passed in March, has been one contributor to rising prices.
The result of the bill is, “we've seen very strong demand and against the supply constraints, that strong demand has led to higher inflation,” Phillip Swagel, director of the Congressional Budget Office, said.
Another shot across the bow came from Steven Rattner, who served as counselor to the Treasury Secretary in the Obama administration, in an op-ed Tuesday. When it comes to inflation, the “original sin was the $1.9 trillion American Rescue Plan,” he wrote.
Taking ‘the edge off of inflation’
Democrats have been quick to draw a distinction between the ARP and the current legislative agenda, including the BBB Act as well as the bipartisan infrastructure deal, which was signed into law this week.
Many economists agree that the current bills – which are largely paid for and designed to infuse less money into the economy – are less likely to lead to inflationary pressures. Economists and analysts at two leading rating agencies, Moody’s and Fitch, said as much this week.
Biden kicked off an event in Detroit this week by bragging about the news from those “two Wall Street outfits”; he quoted the reports, saying the bills won’t add to inflation “because the policies I proposed ‘help lift long-term economic growth via stronger productivity, labor force growth,’ as well as taking ‘the edge off of inflation.’”
A research briefing published Friday by Oxford Economics came to the same conclusion: "We expect the BBB to have a minimal impact on inflation, with the price level being a marginal 0.2% higher by the end of 2023. Unlike prior Covid relief packages, the BBB will be mostly paid for. Plus, only a small share of BBB spending will go toward payments to households that can be spent quickly."
President Joe Biden after touring the General Motors 'Factory ZERO' electric vehicle assembly plant in Detroit this week. (REUTERS/Jonathan Ernst) ·(Jonathan Ernst / reuters)
Democrats have also noted that there are provisions focused on housing, childcare, and prescription drugs designed to lower those costs over time. In an interview with Yahoo Finance on Thursday, Sen. Tina Smith (D., Minn.) said she supported the BBB because it would “take concrete steps to lower prices for the things that keep Americans up at night, like prescription drugs and childcare” adding that passing the bill would help in “getting back to some semblance of normal.”
The pushback from many more conservative economists is that much of the spending in the Build Back Better Act is front-loaded to the next few years. One often-cited example is a one-year extension of the expanded child tax credit with that cost being borne over 10 years.
“It doesn't hang together fiscally,” Douglas Holtz-Eakin, president of the American Action Forum, recently told Yahoo Finance.
Rattner made a similar point in his op-ed. The bill front-loads the spending and “the administration should come clean with voters about the impact of its spending plans on inflation,” he wrote.
The Senate is expected to consider the massive bill in the coming weeks with Democrats hoping for another White House signing ceremony by Christmas.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.
