CLAIM: Vulnerable Democrat Rep. Cindy Axne (IA) claimed inflation is not caused by the increase in government spending mainly advanced by Democrats during and after the coronavirus pandemic.
Verdict: Mostly False.
Axne, Iowa’s lone congressional Democrat, during a recent radio interview dismissed the narrative that the increase in government spending during and after the coronavirus pandemic caused the rise in inflation as a “talking point.”
“The facts are that although there is inflation, it isn’t just because of — you can’t ever just — listen, I wouldn’t blame inflation on President Trump, and I’m not going to blame it on President Biden,” Axne said to the radio host. “To do so is so shortsighted, and doesn’t look at the reality of things.”
Additionally, the congresswoman, trying to shift the blame from the Democrats’ massive spending bills, claimed that inflation happened because of the “decades of moving products out of our country” and “decades of putting tax policy in place that hurt working-class families,” in addition to the pandemic.
However, last year, the Democrats, including Axne, happily promoted and voted for the Democrats’ $1.2 trillion, 2,702-page so-called infrastructure bill and the $1.9 trillion American Rescue Plan, which helped fuel inflation.
Over the past year, prominent economists such as Olivier Blanchard and Larry Summers have called out Democrats in an effort to raise awareness about inflation, which has hit a 40-year high. Consumer prices were up 7.5 percent compared with a year ago in January, jumping the most in nearly four decades as the new year started, and are expected to be up 7.9 percent in February when the Department of Labor releases the latest figures on Thursday. As a result, inflation is zapping the savings accounts of American families, pushing up the prices of everything from groceries to cars, causing real wages to fall, and putting pressure on the Federal Reserve to hike the interest rates in March.
Asset manager Steve Rattner, who served as counselor to the Treasury Secretary in the Obama administration, wrote last November in an opinion piece at the New York Times that Biden’s American Rescue Plan was the “original sin” that caused inflation.
“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,” Rattner wrote, noting at the time that inflation is the Biden administration’s “biggest challenge.”
Summers — the Treasury Secretary under Bill Clinton, director of the National Economic Council under Barack Obama, former president of Harvard University, and chief economist of the World Bank — had warned the country in many interviews over the past year about the increase in government spending.
During an interview with CNN, Summers argued that Biden’s American Rescue Plan pumped up demand too much without taking steps to increase supply, which resulted in inflation. “I do think that, unfortunately, some of the predictions that I made about the consequences of stimulus do seem to have come true.”
“People underestimated how much demand was going to be created by all the fiscal stimulus in the Recovery Act and all the expansionary monetary policy, and at the same time, they overestimated the economy’s supply potential,” Summers additionally said when interviewed by PBS NewsHour. “Because they didn’t recognize the damage that was going to be done over the medium term by COVID.”
Breitbart News’s Economics Editor John Carney wrote:
Although many economists and anti-Trump journalists claimed President Donald Trump’s tariffs would raise prices, consumer prices remained low throughout his administration. Trump’s tariffs turned out not to be taxes on consumers. Instead, they were absorbed by Chinese producers and exporters and the profit margins of most large U.S. companies.
Inflation only began to accelerate last March after years of coming in below the Fed’s two percent target. The Fed had decided to keep interest rates low although the economy was recovering at a faster than expected rate. What’s more, the Biden administration pushed through billions of dollars of deficit spending in the American Rescue Plan. These combined to fuel demand for goods and services faster than supplies could expand, pushing up prices.
Federal Reserve chief Jerome Powell, following the advice of many of the economists on the central bank’s staff, initially claimed that inflation was due to transitory factors. Fed officials forecast that inflation would fall in the latter half of 2021, predicting that supply chains would swiftly unsnarl and a rebalancing of consumer demand from goods to services would relieve pricing pressure. The Biden administration, under the tutelage of former Fed chair and now Treasury Secretary Janet Yellen, largely followed suit and continued to press for even more spending.
Nonetheless, data from the Commerce Department had recently shown that the price of “big-ticket consumer goods” such as durable goods, which are items made to last three or more years, rose over the past twelve months by 11.6 percent, which is the most significant annual increase since 1975. Furthermore, nondurable goods prices rose by 7.2 percent, and services prices rose by 4.6 percent.
“The inflation in the price of durable goods has been even more jarring to consumers because it follows a quarter of a century in which prices consistently fell year after year,” Carney wrote.
Additionally, the Wall Street Journal recently published a piece acknowledging that the rise in prices and the supply chain crisis caused by the Democrats will also impact their behemoth spending bill, since the costs of services are rising. The Biden-backed bill may not be able to afford the cost of roads, bridges, railways, and fiber optic lines that were supposed to be fully funded from the bill:
Elevated costs for materials and labor are already pushing contractors to charge more for construction projects, government data show, increases that economists and industry officials say could reduce the number of infrastructure projects the new federal money can finance. State and local officials facing higher prices may give priority to easier, less ambitious projects, and some worry that a rush of government spending could exacerbate inflation in the industry.
The cost of construction projects for government rose 13% in January compared with a year earlier, according to supplier price information released by the Labor Department last week. The producer-price index also showed input prices for construction of highways and streets was up 20% from a year earlier, with steel mill products and plastic construction products up 113% and 35%, respectively, over a year. The price of gasoline and diesel fuel are each up more than 50%. Those cost increases well outpace consumer inflation, which advanced 7.5% in the past year, the fastest rate in four decades.
Some in the industry hope technological advancements, as well as new employment opportunities generated by the federal infrastructure spending, could mitigate the labor shortage. But Ken Simonson, the chief economist for the Associated General Contractors of America, said greater flexibility and rising wages at other jobs may limit the draw of new workers into the construction jobs, where workers need to be on site.
Last year, Breitbart News also fact-checked Axne on her claim that Biden’s Build Back Better agenda would cost Iowans “literally nothing.” Breitbart News found that claim was false, since Biden’s BBB agenda would burden Americans with trillions more in debt.
Jacob Bliss is a reporter for Breitbart News. You can follow him on Twitter.
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