In holding up President Joe Biden’s “Build Back Better” (BBB) plan, West Virginia Democrat Sen. Joe Manchin has cited inflation as one of his foremost concerns about the bill, while Americans have watched November’s inflation numbers jump to the worst in nearly 40 years. Manchin says he worries BBB’s huge spending provisions could cause America’s already serious inflation problem to worsen substantially.
Manchin’s opposition to the act effectively destroys any hope of the bill passing in the near future in the evenly split U.S. Senate. The act is President Biden’s signature policy proposal, and it could prove to be congressional Democrats’ last chance of making good on their promise to impose “bold” reforms. Manchin’s decision to effectively end any hope of the BBB bill passing presents a massive setback for the White House and congressional leadership.
His fears about the bill and its effect on inflation are absolutely warranted.
The United States is now unquestionably facing an immense inflation crisis. In November, the consumer price index (CPI), a widely used measure of inflation that calculates price changes across a basket of goods and services, increased by 6.8 percent on a year over year basis. According to an analysis by CNBC, the CPI hasn’t increased that quickly since June 1982, nearly 40 years ago.
The producer price index, which measures prices charged by suppliers, increased by 9.6 percent in November 2021 compared to the previous year — the largest increase on record.
In the third quarter of 2021, the average sales price of a home was $453,300, the highest price ever recorded and $55,000 more than the third quarter of 2020. The average cost of a new car is now more than $44,000. Used car prices have soared to $27,500, about 35 percent higher than at the start of 2021.
Although numerous factors have contributed to these dramatic price changes, including supply-chain problems caused by governments’ coronavirus-related lockdowns in 2020 and 2021, one of the biggest catalysts driving inflation is the massive amount of money-printing and government spending politicians have chosen since the start of the pandemic.
Over the past two years, government spending and central bank money-printing have reached unprecedented levels. Trillions of dollars have been poured into the U.S. economy at a pace that has never been reached before. Making matters worse, congressional Democrats and President Biden continued to print and distribute cash in 2021 after most of the economy had already reopened, and such policies were no longer necessary.
As any undergraduate college student enrolled in Economics 101 will tell you, when too many dollars chase too few goods and services, inflation results. That is exactly what has happened over the past year under reckless big-spending policies.
Democrats’ Build Back Better legislation would have exacerbated America’s inflation crisis by creating gargantuan new spending programs and extending pandemic-era tax credits for childcare and health care, among other things.
Democrats have repeatedly said that the $2.4 trillion BBB would be paid for by increasing taxes on the wealthy and corporations. President Biden even claimed the bill “costs zero dollars.” Neither claim is true.
As written, Build Back Better would add nearly $160 billion to the national deficit over 10 years, but the real cost is likely trillions higher.
To move the BBB through the Senate’s budget reconciliation process, and to trick voters into thinking Build Back Better is much more affordable than it actually is, Congress included a number of sunset provisions in the bill that would end most of the legislation’s key programs and tax credits within the next several years, sometimes after just one year.
For instance, Democrats’ highly touted universal pre-K program would technically expire after just six years under the Build Back Better plan, so on paper, the program’s costs would disappear in six years as well.
This, of course, is incredibly unlikely. Can you imagine our feckless Congress throwing hundreds of thousands of kids out of an already existing pre-K program, forcing moms and dads who have come to rely on these programs to pay thousands of dollars out of pocket for a service they have been getting at zero cost for nearly half a decade?
Realistically, nearly all of the BBB would remain in place over the next 10 years if it were to become law, regardless of the bill’s sunset provisions. And everyone in Congress knows it, including Manchin.
According to the nonpartisan Committee for a Responsible Federal Budget, if all of the provisions of the Build Back Better Act were to remain in place for at least a decade, the total cost of the legislation would swell to nearly $5 trillion, and the national deficit over the same period would increase by $2.8 trillion. (Yes, that’s trillion with a “t.”)
Suddenly, the price tag of “building back better” just got a whole lot higher than President Biden’s claim of “zero.”
While Congress could theoretically offset some of these additional costs with even more tax increases, it’s much more likely that it would simply continue to allow the Federal Reserve to print money to pay for the costs, driving inflation beyond its already disastrous levels.
By rejecting the Build Back Better Act, Manchin didn’t solve America’s existing inflation problems. That can only happen once the global supply chain is repaired and fiscal sanity returns to Washington. He did, however, just help the country avert a worse inflation catastrophe — at least for now — and he deserves high praise for doing so.