It may leave many people wondering how, after approving nearly $3 trillion in spending measures in 2021, the economy could be in retreat.
A man who was appointed by President Bill Clinton and served under President George W. Bush as head of the Government Accountability Office (GAO) thinks he knows how.
“The dramatic increase in alleged COVID-related spending was a primary contributor to stimulating the economy in 2021, but it also stoked excess inflation,” David Walker, who was appointed comptroller general in 1998, told The Epoch Times.
Inflation Followed the ARP
Indeed, inflation began to spike just months after Biden signed the ARP.And while energy prices were trending higher under Biden, the first-quarter increase in 2022 represented the type of fuel price spike the country hasn’t seen since just prior to the 2008 market crash.
COVID-19, Inflation Add to Concerns
Americans may also be growing weary of “head fakes” as the country recovers from COVID-19.“Seventy-six percent of Americans say the economy is getting worse, 20 percent say it is improving, and 3 percent think it is staying the same,” Gallup said.
The high cost of living, the economy in general, and fuel prices lead consumer concerns, as inflation rises to its highest level since 1981, the survey said.
Approving more money to spend to create more economic activity risks making inflation worse, but analysts note that politicians have a hard time doing nothing amid a crisis in an election year, even if the things they do create even more damage.
“Biden certainly isn’t helping things,” Walker said, adding that the administration’s measures have hurt the economy, such as bans on domestic oil exploration and federal mandates that have led to job losses and economic disruption.
The White House didn’t respond to a request for comment by press time.
No Good Policy Choices Left
Policymakers at this point have few good choices, some say, which tends to be the case when inflation spikes in an uncontrolled frenzy.“There is a serious conundrum as prudent measures to quell inflation might push the world into a recessionary situation while measures to stimulate growth and fight contraction might cause inflation to spiral recklessly out of control,” Bryan Slusarchuk, a precious metals mining operator, told The Epoch Times.
Already, Republican election campaigns are sharpening daggers, using the combination of slow economic growth and high prices as the tip of what could be a dangerous weapon against Democrats in the midterms.
Other experts, including Biden critics, are taking a more wait-and-see approach, saying that the first-quarter contraction could be just a temporary downturn. First-quarter gross domestic product (GDP) performances are notoriously difficult to gauge because of weather and other factors.
Mitchell said Americans should be thankful that Biden’s social spending package, known as “Build Back Better,” wasn’t approved in the fall, or things could be worse.
“The threat of Biden’s so-called Build Back Better has probably had a negative effect since businesses, investors and entrepreneurs don’t know whether it will still be profitable to create new jobs,” he said.
Student Loan Action Could Add to Inflation
Things could grow much worse if Biden takes action toward reducing the $1.6 trillion in outstanding student loans, which in effect would be no different than if Biden approved any other spending bill for $1.6 trillion, conservatives warn.The contraction in GDP may signal the end of the inflationary spiral, but with a trillion dollars in unspent COVID-19 relief and a range of options for Biden to cancel student debt, there still may be enough fuel to keep inflation raging even as the economy slows, a textbook case of stagflation.
Still, some say that the track record of economists and politicians who are now reassuring people there’s nothing to worry about is anything but reassuring.
“If the Biden administration wanted to fight stagflation, it would be cutting red tape, encouraging business activity and investment, and slashing federal spending. But it’s not doing that.”