THEY CAN’T HELP THEMSELVES. Here’s the short version of this newsletter: 1) A new government report shows inflation at devastating levels — 9.1% on an annual basis in the last year. 2) There is a bipartisan consensus that recent massive government spending has made inflation worse. 3) Democrats are trying to pass more massive government spending.
It’s crazy. And yet Senate Majority Leader Chuck Schumer (D-NY) is scrambling to build Democratic support for a spending bill that would pass Congress on party-line votes before November’s midterm elections, when Democrats are expected to lose their majority in the House and perhaps in the Senate. Schumer is in negotiations with Sen. Joe Manchin (D-WV), who almost single-handedly scuttled the last version of his party’s big spending proposal, known then as “Build Back Better.”
Remember Build Back Better? Democrats had already passed a $1.9 trillion “American Rescue Plan” ostensibly devoted to “COVID relief.” Then a bipartisan group in the Senate passed a $1 trillion infrastructure bill. And that was on top of big stimulus bills passed during the coronavirus crisis in 2020. By the fall of 2021, it was clear that flooding the country with money, as Congress was doing, was worsening inflationary pressures.
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“We put gasoline on the fire,” Marc Goldwein of the Committee for a Responsible Federal Budget told the liberal publication Vox in May. “That’s basically what the American Rescue Plan did.” The Vox article, by the way, was headlined, “Biden’s American Rescue Plan worsened inflation. The question is how much.” The answer to that question was: a lot. But the exact amount is still unknown. At the time the Vox article was published, inflation was 8.3%. Now it’s 9.1%. It is not clear where it is going next.
Then came Build Back Better. After pouring gasoline on the inflationary fire with earlier spending bills, Democrats proposed to pour much, much more with Build Back Better, which was viewed as the centerpiece of the Biden agenda — an enormous grab bag of environmental spending, healthcare spending, welfare spending, child care and preschool subsidies, an extended child tax credit, and more. There were many versions of the proposal, although never any final bill. At one point, Democrats were seriously discussing spending $3.5 trillion on Build Back Better — dwarfing their earlier spending bills. Can you imagine the inflationary pressures that would have created?
Enter Manchin. The Democrat from West Virginia never signed on to his party’s plans, even when Schumer reduced the price tag to a measly $2.5 trillion, or even lower. Manchin’s No. 1 reason was inflation. He likened inflation to a tax on the public and said he could not support more big spending with “inflation taxes that are real and harmful to every hard-working American at the gasoline pumps, grocery stores, and utility bills with no end in sight.”
Manchin said that on Dec. 19, 2021. In the weeks that followed, Build Back Better appeared to die a slow death. The country could breathe a sigh of relief knowing that, with inflation already a terrible problem, Congress had at least not acted to make it even worse.
But, of course, Build Back Better wasn’t really dead. Undaunted by inflation, Democrats ditched the name and kept trying to pass as big a spending bill as possible. They’re still trying. But they know that they have very little time left before the summer recess, and then, after that, midterm campaigning will consume Congress. So they are redoubling their efforts.
Schumer and Manchin are said to be negotiating over a new bill, perhaps around $1 trillion, that would include climate measures, clean energy subsidies, prescription drug and healthcare subsidies, and more. The two were said to be making progress until they hit a familiar obstacle: inflation. This week’s 9.1% report jolted everyone in Washington, including Manchin.
“I am very, very cautious,” Manchin told reporters this week. “Basically, take your time and make sure we do it and do it right. We can’t afford mistakes in the highest inflation we’ve seen in the last 40 years.” That sounds a lot like the Manchin of December. Now remember, Manchin is a Democrat, and he would like to make a deal of some sort with his party. But in recent statements, he has made it clear that he will not go along with Build Back Better II.
So it seems likely that Democrats will fail in a last-ditch effort to make inflation worse before they lose the power to do so. That failure, of course, will be a good thing for the country. But it won’t be because Democrats did not try.
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