PolitiFact has hit White House Press Secretary Jen Psaki with a “false” rating over her claim about how economists feel about President Joe Biden’s spending agenda.
Psaki has repeatedly said that economists back Biden’s $1.75 trillion Build Back Better bill. Last week, for instance, Psaki told reporters that “no economist out there is projecting that this will have a negative impaction inflation.”
“Is it really true that there’s not a single economist who thinks the bill will boost inflation? No,” PolitiFact reacted in an article published Thursday. “Many economists have stated for the record that they think the inflationary impact of the bill will be small and brief. But we found lots of economists who say they expect modest inflationary pressure, at least initially.”
In her November 15 press briefing, Psaki was asked, “Why should Americans not be concerned that injecting another $1.75 trillion or more would further raise inflation?”
“Because no economist out there is projecting that this will have a negative impact on inflation,” she said. “And actually, what it will help do is it will help increase economic productivity. It will help economic growth in this country. That, and the Build Back Better Agenda will help reduce inflation, will help cut costs for the American people over the long term.”
PolitiFact cited some economists as proof. “I’m an economist, and I disagree,” Douglas Holtz-Eakin, president of the center-right American Action Forum, told the fact-checking site.
“We know there’s lots of spending in the bill, and that it’s front-loaded” into the earlier years, he said. “If you cut taxes and increase spending, financed by debt, that will put upward pressure on inflation.”
Other economists said much the same thing.
“You should wind up with primarily a deficit-financed spending bill that is going to be rolled out in an economy near full employment … . It will make the labor market even hotter and create even more price pressure,” said Ethan Harris, head of global economics research at Bank of America.
Michael Feroli, chief U.S. economist for JPMorgan Chase, agreed, telling PolitiFact: “Right now, anything that expands aggregate demand is not warranted, not advisable. … The economy seems to be operating pretty close to its capacity constraints.”
The site said massive government spending causing inflation is just “textbook economics.”
“Inflation is the result of too much demand chasing too little supply,” said John Leahy, a professor of macroeconomics and public policy at the University of Michigan. “Anyone arguing that the bill is inflationary can point to any standard economic textbook: An increase in government spending should increase demand and thereby increase inflation. This will happen even if the spending is fully paid for through taxes, since the government spending increases demand one for one and the taxes reduce demand only to the extent that firms or consumers reduce their spending as a result, and this reduction is typically less than one for one.”
In conclusion, PoltiFact wrote:
Psaki said, “No economist out there is projecting that (the Build Back Better bill) will have a negative impact on inflation.”
She’s wrong to say that no economist foresees inflation as a result of the bill’s passage. Numerous economists, including some allies of the White House, have gone on the record saying there probably will be inflationary effects, especially in the near term, if the bill is passed.
However, the broad consensus among analysts has been that the bill’s inflationary impact will be modest and brief.
We rate the statement False.