President Joe Biden pushed back hard Friday on claims that his spending policies and those of the Democrat-controlled Congress are making inflation worse.
“Last year — because of all you did — we reduced the deficit by 360 billion dollars,” Biden told the 2022 House Democratic Caucus Issues Conference in Philadelphia.
“We, the Democrats — while the economy grew! “We’re on track right now … to be the first president in history to lower the deficit by over 1 trillion dollars in one year,” he claimed.
“So, I’m sick of this stuff!” he added. “We have to talk about it because the American people think the reason for inflation is government spending more money. It’s simply not true.”
Biden: "I'm sick of this stuff … the American people think the reason for inflation is government spending more money. Simply not true!"
— RNC Research
Previously, Biden claimed that he was the first president to lower the deficit by $1 trillion, most notably in his State of the Union address in early March.
But, as explained by The Wall Street Journal, that embellishment is “one for the ages” because, the paper said, Biden was ignoring potential spending bills and COVID-19 relief funds he wanted to pass during his first year in office:
He’s also using the fiscal 2020 budget as his benchmark. Congress passed $2 trillion in Covid relief in March 2020 to prevent a recession. Both parties piled on $900 billion more that December, and Democrats in March 2021 ladled out nearly $2 trillion more. The deficit is declining because Congress blew it out for two years.
Revenues have been surging thanks to strong corporate profits, capital gains, and rising nominal incomes. Inflation is always good for government coffers. Receipts are up 28% during the first four months of this fiscal year. But the Congressional Budget Office still projects deficits to exceed $1 trillion on average over the next decade.
Regarding increased government spending having led to inflation, it is unclear on what economic reality the president is basing that claim, The Daily Wire noted.
The Hoover Institute’s John Cochrane explained in a separate WSJ interview how the government’s behavior over the past few years is specifically to blame for worsening inflation and will continue to be responsible for it so long as the money spigot continues to flow.
He told the Journal that inflation is “dreams of costless fiscal expansion, flooding the country with borrowed money to address every perceived problem, hit a hard brick wall of reality.”
He also noted more clearly that COVID-19 stimulus checks, as well as other government spending checks, caused the inflation the country is currently experiencing:
He traces the present inflation to the pandemic and the government’s response. Starting in March 2020, “the Treasury issued $3 trillion of new debt, which the Fed quickly bought in return for $3 trillion of new reserves.” The Treasury then sent checks to people and businesses, later borrowing another $2 trillion and sending more checks. Overall federal debt rose nearly 30%. “Is it at all a surprise,” Mr. Cochrane asks, “that a year later inflation breaks out?”
He likens this $5 trillion in checks to a “classic parable” of Milton Friedman (1912-2006), the great monetarist at the University of Chicago, where Mr. Cochrane was a professor for 30 years before moving to Stanford in 2015. “Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community,” Friedman wrote in “The Optimum Quantity of Money” (1969). If they spent the money, inflation would result.
The Covid checks, Mr. Cochrane says, were “an immense fiscal helicopter drop. People are spending the money, driving prices up.”
Biden also blasted Republicans for the spending, though the past several major spending bills for COVID and economic recovery were extremely bipartisan.
“I don’t think we need any lectures about fiscal responsibility, for God sakes,” Biden added during his Friday speech.