White House on Stimulus Causing Inflation: We Don’t Have Stimulus Causing Inflation Now, We Needed to Spend

On Monday’s broadcast of CNBC’s “Squawk Box,” White House Council of Economic Advisers Chair Jared Bernstein responded to criticism that fiscal stimulus created inflation by stating that “the American Rescue Plan was essential to get shots in arms and checks in pockets to get us to the other side of the crisis induced by the pandemic” but there isn’t an inflationary impact to government spending now and that while demand factored into earlier inflation, much of it was due to supply issues.

Co-host Joe Kernen said, “I guess the market — it took a couple of years to hit the highs that we had hit. Though, we are matching those and that is certainly true. But I’ll tell you what the other side, or what critics would say, sure, if you use a lot of fiscal stimulus and a lot of monetary stimulus, you’re going to get a pretty solid economy. It’s going to have the look of a solid economy, because you’re — obviously, it’s Keynesian, you’re probably not going to have a recession, but what it results in [is], at least, maybe it’s a temporary inflation spurt, but it was a really nasty one, Jared.”

Bernstein responded, “So, on fiscal policy, absolutely, the American Rescue Plan was essential to get shots in arms and checks in pockets to get us to the other side of the crisis induced by the pandemic. And remember, when we came into office, there was about a 0% vaccination rate across the country. So, getting that program going relative to our predecessor was essential for reopening the economy. But, at this point, there is zero or even negative fiscal impulse. And that’s a really important term in this context. What it means is the change between fiscal activity last year and this year. And so, fiscal impulse really isn’t contributing much to the economy’s growth at all.”

He also stated, “Now, on inflation, a lot of what we saw was very much associated with the supply side of the economy, not all of it. Demand is in the mix, but global inflation was caused by global supply chain snarlups and we very worked hard to help unsnarl those snarlups, and that’s really showing up in these easing price pressures.”

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