February 17, 2022
When most people are confused about an issue they try to get more information. Steven Rattner writes a New York Times column.
The gist of Rattner’s piece, as told in the title, “Biden Keeps Blaming the Supply Chain for Inflation. That’s Dishonest,” is that the Biden administration is lying when it says the jump in inflation is due to supply chain issues. Rattner tells us instead that the inflation is due to the large budget deficits that have created too much demand in the economy.
The biggest problem with Rattner’s story is that there has been a large jump in inflation rates in other wealthy countries as well, most of which did not have stimulus packages anywhere near the size of the recovery package pushed through by Biden. While the Biden package surely added to inflation in the U.S., the fact that other countries also saw a rise in inflation suggests that the main factor was reopening from pandemic shutdowns, not an overheated economy.
The dividend from the Biden package was that it quickly got the unemployment rate down to almost its pre-pandemic level . It also pushed GDP almost back to its trend path, a feat no other country has accomplished. Also, with GDP more or less on its trend growth path, it is hard to maintain that the economy is now suffering from excess demand, as opposed to an inability to meet current demand due to supply chain issues, as the Biden administration claims.
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