Inflation Fears Grow Just As Democrats Propose Another Gargantuan Spending Blowout

Before Democrats Passed Their Last Nearly $2 Trillion Spending Bill, Senate Republicans Warned, ‘As There Are More And More Dollars Chasing Fewer Goods, You Are Going To Get Inflation’

SENATE REPUBLICAN WHIP JOHN THUNE (R-SD): “There is a lot of money out there in the economy. What does that mean long-term for our economy and for the individual workers in our economy? Well, first off, it means that as there are more and more dollars chasing fewer goods, you are going to get inflation. That is inevitable. When you get inflation, typically what happens is interest rates follow because those who are buying that debt, if it is being lost to inflation, want to make sure that they are getting a return on their investments, so interest rates start to go up. … Well, if you keep putting as much money out there as we are--another $2 trillion out into the economy--I would argue that you are not only going to unleash inflation, which has a dramatic consequence for our fiscal situation as a country, but it also has a dramatic consequence for the personal financial situation of the American family because when inflation takes off, everything that people have to buy, from food to gasoline to clothing--all those things go up. Inflation pushes the prices of things higher, which means they are more expensive to the average family in this country.” (Sen. Thune, Congressional Record, S1006, 3/03/2021)

• SEN. THUNE: “The Democrats' COVID bill runs a very real risk of overstimulating the economy, as evidenced by the large increase we have seen in money supply which could, among other things, drive up prices on the goods that Americans use every day--in other words, inflation. Even some liberal economists have sounded the alarm over the size of the Democrats' coronavirus legislation. …  And that, I believe, is a very, very real threat, because if you look at what is happening right now with the economy and with all the money that we have flooded out there so far and another $2 trillion, if the Democrats have their way in this particular proposal, and all that money out there starts pushing up those costs and we start seeing inflation in the economy, it doesn't take very long for interest rates to go with it. In fact, they already are. If those interest rates start pushing up very quickly on the amount of debt that we are piling up, financing that debt--the amount of interest, the cost of interest on that debt--would be absolutely overwhelming and devastating to this country.” (Sen. Thune, Congressional Record, S969, 3/01/2021)

SEN. RICK SCOTT (R-FL): “We cannot allow a radical liberal agenda to destroy America's chance to ever get out of this hole. As we recover from the pandemic, inflation will rise from its 2020 low of 1.4 percent to nearly 2.3 percent or more. That is a 60-percent increase in inflation. But if Congress continues to recklessly spend and do nothing about our growing debt, inflation will increase higher. There is a direct link between the Federal Government's unsustainable spending and the rising cost of goods and services. Here is what that means for American families: The price of everyday goods will rise; gas prices will rise; and rental housing costs will increase. Increases in inflation hit America's hourly workers and fixed-income families the hardest. ... So while politicians in Washington keep spending money like it is a game, American families suffer. Radical spending and reckless proposals directly hurt families.” (Sen. Scott, Congressional Record, S283, 2/03/2021)

SEN. CHUCK GRASSLEY (R-IA): “At this time, instead of $2 trillion, two-thirds of it not needed, why not help those hurting and not pour gasoline on the inflationary fires? A COVID relief package should reflect this reality in both size and scope. … Enacting a stimulus unmoored from economic reality poses real risks to our economy, including inflation and slower economic growth moving forward. … While inflation has been subdued in recent years, we shouldn't let that lull in inflation lull us into a false sense of confidence that we can spend with impunity with no consequences. …  Concerns of inflation have been dismissed by the White House and by the Federal Reserve. This sounds too familiar to those of us who witnessed the stagflation of the 1970s. … It was with this background of stagflation that I first ran for Congress on a platform of fighting inflation. Inflation is a regressive stealth tax on every single American.” (Sen. Grassley, Congressional Record, S1006, 3/03/2021)

SEN. JOHN CORNYN (R-TX): “As I said, every penny that is spent on pandemic response is borrowed from our grandchildren and our great-grandchildren. Somebody is going to have to pay the money back--not us, not now, apparently. We are going to borrow the money, add to deficits and debt. As Larry Summers and others have said, we are even risking inflation by throwing so much money into the economy so quickly, at a time when it is growing at more than 4 percent a year. And we are not, if this effort is successful, spending this money responsibly. Being responsible means doing what is needed--no more, no less--to bring this pandemic to an end and get this country back on its feet.” (Sen. Cornyn, Congressional Record, S971, 3/01/2021)

SEN. ROB PORTMAN (R-OH): “We heed the advice of prominent Democratic economist Larry Summers and so many others who have now said that the $1.9 trillion Biden stimulus is not just wasting taxpayer money; it risks overheating an already recovering economy, leading to higher inflation, hurting middle-class families, and threatening long-term growth. But rather than the counterproposal leading to this productive type of bipartisan negotiations we had last year, this time we have been told Democrats want to go it alone.” (Sen. Portman, Congressional Record, S1012, 3/03/2021)

SEN. STEVE DAINES (R-MT): “The Democrats want to push another $2 trillion into this economy that is poised to rebound as businesses reopen. It is deeply irresponsible. It will needlessly cause our debt to soar to new heights and could harm our economic recovery by sparking inflation. Its partisanship is exceeded only by its recklessness.” (Sen. Daines, Congressional Record, S979, 3/01/2021)

SEN. TOMMY TUBERVILLE (R-AL): “The massive $1.9 trillion bill was not COVID-19 relief; it was liberal relief. Everybody and everyone needs to understand what this was. It was not a rescue plan. It was a heist of taxpayers' money. We don't have $1.9 trillion to be spending. When we have to borrow this much money, we are digging our country deeper into debt. And with this massive spending bill, we are borrowing against our grandkids' future and are going to owe more and more countries like China.  To keep up, the money supply will have to increase at such a rapid rate, it could potentially spark inflation. That means we could see the value of Americans' hard-earned dollars plummet. To further underscore that point, that means your money doesn't go as far. For the items you buy, it is very expensive. All of this bogs down our economy and hinders future growth.” (Sen. Tuberville, Congressional Record, S1419, 3/09/2021)

‘U.S. Inflation Continued To Accelerate In June At The Fastest Pace In 13 Years’

“U.S. inflation continued to accelerate in June at the fastest pace in 13 years as the recovery from the pandemic gained steam and consumer demand drove up prices for autos, airline fares and other items. The Labor Department said last month’s consumer-price index increased 5.4% from a year ago, the highest 12-month rate since August 2008. The so-called core price index, which excludes the often volatile categories of food and energy, rose 4.5% from a year before. The index measures what consumers pay for goods and services, including clothes, groceries, restaurant meals, recreational activities and vehicles. It increased a seasonally adjusted 0.9% in June from May, the largest one-month change since June 2008.” (“Inflation Accelerates Again in June as Economic Recovery Continues,” The Wall Street Journal, 7/13/2021)

• “Prices of goods, excluding food and energy, saw the two biggest monthly increases on record in April and May, [chief economist at Regions Financial Corp. Richard F.] Moody said.” (“Inflation Accelerates Again in June as Economic Recovery Continues,” The Wall Street Journal, 7/13/2021)

• “Rising prices reflect robust consumer demand boosted by widespread vaccinations, the ending of many business restrictions, trillions of dollars in federal pandemic relief and ample household savings.” (“Inflation Accelerates Again in June as Economic Recovery Continues,” The Wall Street Journal, 7/13/2021)

“More companies are passing on higher labor and materials costs to consumers. Many also are raising prices for the first time in years, as demand surges following pandemic-related business restrictions.” (“Inflation Accelerates Again in June as Economic Recovery Continues,” The Wall Street Journal, 7/13/2021)

• “Prices for used cars and trucks leapt 10.5% from the previous month, driving one-third of the rise in the overall index, the department said, marking the third straight month of big price increases amid a supply shortage of vehicles. The indexes for airline fares and apparel also rose sharply in June.” (“Inflation Accelerates Again in June as Economic Recovery Continues,” The Wall Street Journal, 7/13/2021)

“Wholesale prices for June rose more than expected in another sign that inflation is moving at a faster pace than markets had anticipated. The producer price index, which measures what companies get for the goods they produce, increased 1% from May and jumped 7.3% on a year over year basis. That marked the second month in a row that the PPI set a record for a data series that goes back to 2010.” (“Wholesale Prices Rose 7.3% In June From A Year Ago For A New Record Surge,” CNBC, 7/14/2021)

Even The Fed Chairman Admits Inflation ‘Has Been Higher Than We’ve Expected And A Little Bit More Persistent Than We Had Expected And Hoped’

“Federal Reserve Chairman Jerome Powell said inflation had increased notably and would likely remain elevated in the coming months before moderating. Inflation ‘has been higher than we’ve expected and a little bit more persistent than we had expected and hoped,’ Mr. Powell said in testimony Wednesday before the House Financial Services Committee.” (“Powell Says Inflation to Remain Elevated Before Moderating,” The Wall Street Journal, 7/14/2021)

• “Some central bankers have become more worried. A ‘substantial majority’ of Fed officials ‘judged that the risks to their inflation projections were tilted to the upside because of concerns that supply disruptions and labor shortages might linger for longer and might have larger or more persistent effects on prices and wages than they currently assumed,’ minutes from their June meeting showed.” (“Prices Pop Again, and Fed and White House Seek to Ease Inflation Fears,” The New York Times, 7/13/2021)

Business Leaders ‘See Price Pressures Lasting’ And ‘Consistently Have Cited Higher Inflation In Their Earnings Reports’

“Some members of the business community see price pressures lasting. Hugh Johnston, the chief financial officer of PepsiCo, told analysts on Tuesday that the company was anticipating more inflationary pressures via higher costs for raw materials, labor and freight. ‘Are we going to be pricing to deal with it? We certainly are,’ he said.” (“Prices Pop Again, and Fed and White House Seek to Ease Inflation Fears,” The New York Times, 7/13/2021)

• “[C]ompany officials consistently have cited higher inflation in their earnings reports this year. ‘There’s a ton of inflation going on,’ Fastenal CEO Dan Florness said on the company’s earnings call Tuesday. ‘There’s inflation, because of disruption in shipping, i.e., the cost of moving the container, and this is pretty public information, so, I don’t need to cite figures. But it’s gotten really expensive to move a container across the ocean.’” (“Wholesale Prices Rose 7.3% In June From A Year Ago For A New Record Surge,” CNBC, 7/14/2021)

‘There Is A New Fear Circulating Inside The West Wing Of The White House: Maybe Larry Summers Was Right’ About Titanic Government Spending And Borrowing Leading To Inflation

“There is a new fear circulating inside the West Wing of the White House: Maybe Larry Summers was right. The former Treasury secretary has been warning since February that President Joe Biden’s big-spending agenda was creating the risk of an inflation spike this year, potentially cutting into the economic recovery from the Covid-19 pandemic. For the moment at least, Summers is looking prescient.” (“New Concern For Biden: Could Larry Summers Be Right About Inflation?,” Politico, 7/13/2021)

“Summers has vexed the White House and infuriated Democrats with his repeated alarms about Biden’s plans to spend trillions of dollars more in federal money... He has been among the loudest voices in Democratic circles in cautioning about the risk of a prolonged spike in prices. For his part, Summers now says he's more concerned than he was when he first issued his warnings.” (“New Concern For Biden: Could Larry Summers Be Right About Inflation?,” Politico, 7/13/2021)

SUMMERS: ‘I Think Most Factors Point To More Cause For Concern Now Than In 1966,’ ‘These Figures And Labor Market Tightness And The Behavior Of Housing Markets And Asset Prices Are All Rising In A More Concerning Way Than I Worried About A Few Months Ago’

FORMER CLINTON TREASURY SECRETARY LARRY SUMMERS: “These figures and labor market tightness and the behavior of housing markets and asset prices are all rising in a more concerning way than I worried about a few months ago… This raises my degree of concern about an economic overheating scenario. There are huge uncertainties in the outlook, but I do believe the focus of concern right now should be on overheating.” (“New Concern For Biden: Could Larry Summers Be Right About Inflation?,” Politico, 7/13/2021)

• LARRY SUMMERS: “In fact, I think most factors point to more cause for concern now than in 1966 when inflation accelerated 3-4 pts in 4 yrs. Consider this … Then, the deficit was in range of 3 percent. Now the deficit is in the range of 15 percent. Then, nominal and real interest rates then were significantly positive and Fed has no big balance sheet. Now, nominal rates are essentially 0, real rates are negative and the Fed is growing its balance sheet at a rate of more than a trillion a year. Then, there was no saving overhang, no housing price boom and no major asset price inflation. Now, all three are present to an almost unprecedented degree. Then, because of the labor force and productivity growth, supply potential was growing at 3.5 percent. Now it’s less than 2. Then, there was no risk of import inflation because we had few imports and a fixed exchange rate. Now, we have a flexible exchange rate, huge external debts and much larger imports. Then the argument was that measured inflation would not accelerate too much from 2 percent. Now it is that inflation will substantially decelerate from 5 percent. The similarities between the 1960s and now are more political than economic: a deeply divided country with a progressive, experienced, legislatively ambitious President; economists blaming special factors for each worrying number; a socially ambitious Fed.” (Larry Summers, @LHSummers, Twitter, 7/13/2021)

And Now Democrats Are Preparing A New $3.5 Trillion Tax-And-Spend Bonanza

“Top Democrats announced on Tuesday evening that they had reached agreement on an expansive $3.5 trillion budget blueprint, including plans to pour money into addressing climate change and expanding Medicare among an array of other Democratic priorities, that they plan to advance alongside a bipartisan infrastructure deal. Combined with nearly $600 billion in new spending on physical infrastructure contained in the bipartisan plan, which omits many of Democrats’ highest ambitions, the measure is intended to deliver on President Biden’s $4 trillion economic proposal. The budget blueprint, expected to be dominated by spending, tax increases and programs that Republicans oppose, would pave the way for a Democrats-only bill that leaders plan to push through Congress using a process known as reconciliation, which shields it from a filibuster.” (“Democrats Propose $3.5 Trillion Budget to Advance With Infrastructure Deal,” The New York Times, 7/13/2021)

Dem Leaders Are Already Comparing The Level Of Spending And Government Expansion They’re Calling For To That Of The New Deal

SENATE MAJORITY LEADER CHUCK SCHUMER (D-NY): “Very simply: this budget resolution will allow us to pass the most significant legislation to expand support and help American families since the New Deal. Since the New Deal.” (Sen. Schumer, Remarks, 7/14/2021)

SEN. BERNIE SANDERS (I-VT), Senate Budget Committee Chairman: “[It would be] the most significant piece of legislation passed since the Great Depression.” (“Bernie Sanders Lost The Presidency. But He's Shaping The Agenda,” NBC News, 7/14/2021)