Inflation spike bolsters Republicans' criticism of Biden's $4T spending plans
The Labor Department report that US consumer prices for goods and services surged 0.8% in April
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President Biden's $4 trillion tax credit and spending proposals encountered a new political obstacle on Wednesday: The threat of surging inflation, after consumer prices in April saw the biggest increase in decades.
The Labor Department report that U.S. consumer prices for goods and services surged 0.8% in April, the largest monthly increase in more than a decade and the fastest year-over-year jump since 2008. Excluding the volatile food and energy data, core inflation rose 0.9% in April and 3% over the past 12 months.
"There’s so much money out there in the economy that the demand is high, and it’s outpacing supply and it’s starting to push prices up," Sen. John Thune, R-S.D., told Bloomberg on Wednesday. "We need to be a little more cautious and restrained."
YELLEN SAYS INTEREST RATES MAY NEED TO RISE TO STOP ECONOMY OVERHEATING
Republican lawmakers have seized onto the swiftly rising prices, as well as lackluster job creation last month, to argue that more government funding will only hurt the economy as it recovers from the coronavirus pandemic.
"With this morning’s Consumer Price Index (CPI) release, it is clear that inflation is here," Sen. Pat Toomey, R-Pa., tweeted. "The Federal Reserve can no longer pretend this is a distant problem. It is time for the Fed to revisit its accommodative policy stance."
AMERICANS FEARE WORST INFLATION SPIKE SINCE 2013
Since the pandemic began a little more than one year ago, Congress has approved nearly $6 trillion in federal spending designed to keep the nation's economy afloat, including the $1.9 trillion American Rescue Package passed by Democrats in March. The exorbitant level of spending pushed the nation's deficit to a record $3.1 trillion for the 2020 fiscal year and a high of $1.7 trillion for the first half of fiscal 2021.
"There’s so much money out there in the economy that the demand is high, and it’s outpacing supply and it’s starting to push prices up," Sen. John Thune, R-S.D., told Bloomberg on Wednesday. "We need to be a little more cautious and restrained."
Wednesday's report, which showed the consumer price index had jumped 0.8% from the previous month and 4.2% from April 2020, could provide new fodder to Republicans, and some Democrats, who have sounded the alarm about the threat of inflation.
"Larry Summers was right," tweeted Sen. John Cornyn, R-Texas, referring to a top economic official in both the Clinton and Obama administrations who said that Biden's sprawling spending plans could set off inflationary pressures "of a kind we have not seen in a generation."
The Federal Reserve, led by Chairman Jerome Powell, has held interest rates near zero since March 2020 and has repeatedly indicated it will do so until "labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time." Powell has stressed that he sees no signs of persistent inflation.
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Economic projections from policymakers' last meeting show that most officials expect rates to remain near zero through 2023.
Democrats are pushing ahead with passing the president's economic measures, known as the American Jobs Plan and the American Families Plan. The initiatives would invest billions in the nation's infrastructure – including roads and bridges, as well as transit systems, broadband and green energy – and would vastly expand the government's social safety net. The plans would be paid for with a slew of new tax hikes on wealthy Americans and corporations.