The GOP is already blaming Biden’s spending programs for our elevated inflation rate. Is that realistic?
Viewed at the macro level, the answer is no. Aggregate demand is not at extraordinary levels; the problem is that the pandemic has caused consumers to divert expenditures from services to goods, thus artificially increasing the demand (and thus prices) for the latter. This issue should be eliminated over time, as the virus has a waning impact on everyday life. In addition, the only significant Biden spending program that has actually been implemented is the 2021 virus emergency program, which represented a small percentage of GDP, and which has, for the most part, expired. The only lingering effect could be from the stimulus payments, which have probably been spent by now, and how could the GOP complain about them in any event? They were Trump’s idea. Finally, inflation is now an issue throughout the rest of the world. It isn’t just an American problem, which, of course, suggests that Biden is not to blame.
What about the micro level? Could Biden be doing more to address specific problems on the supply side? For that, see my next post.