On Monday’s broadcast of the Fox News Channel’s “Your World,” White House Council of Economic Advisers Chair Jared Bernstein stated that Federal Reserve rate hikes have helped lower inflation by dampening demand and that deficit decreases in 2021 and 2022 “probably helped with some disinflation” but that the spending at the beginning of the Biden administration didn’t help cause inflation.
Bernstein said [relevant remarks begin around 1:55] that the Biden administration’s work on the supply side has helped bring inflation down and that’s why there’s been a decline in inflation while GDP has stayed strong and unemployment rates have stayed low, but the Federal Reserve increasing rates and dampening demand has “absolutely contributed” to lowering inflation.
Host Neil Cavuto then asked, “Well, do you look back, then, Jared, at any of the spending that started when the president took office — and I get it, coming out of something like we were dealing with with COVID and all of a sudden, seeing any activity from that when we were flat on our backs, you’re going to see an uptick in inflation, that’s inevitable — but that you compounded that with some of the spending initiatives you took? … Do you think you added insult to injury by piling on the spending, not only did it add to our debt, it added to this idea that the government and the fiscal side was going to save the day, and it didn’t.”
Bernstein responded, “I don’t really accept the framework, Neil. Because if you look across the globe, you’ll see inflation went up a great deal everywhere, regardless of the fiscal interventions and the magnitude of those interventions.”
After Cavuto cut in to respond that inflation has fallen where interest rates have been increased, Bernstein stated that “inflation has fallen more quickly here than in most other G7 countries.”
Cavuto then cut in to ask, “But you’re not going to use this as a lesson, Jared, in the future, if inflation rears its ugly head again, we’re going to spend, spend, spend? Are you saying that is something the Biden administration would consider in the future if it bubbles up again?”
Bernstein responded, “So, in 2021 and 2022, we actually had very significant deficit reduction. So, it’s the opposite of what you’re suggesting. The fiscal impulse was quite negative in those years, and that probably helped with some disinflation as well.”
Cavuto also noted that we were coming off of massive increases in spending during the pandemic, which Bernstein acknowledged.
Follow Ian Hanchett on Twitter @IanHanchett
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