- Consumer Price Index (CPI): Rose 6.2% on annual basis in October. This is the highest it has been since 1990.
- Food prices rose 5.3% annually.
- Energy prices rose 30% over the year, with gas rising 50%.
- Core prices, excluding food and energy prices rose 4.6% annually in October.
- Wages rose almost 5% in October, but even with that strong growth, consumers’ buying power is declining because prices are rising faster.
The “Build Back Better” Reconciliation Bill
- Over the next year plus, the reconciliation bill will increase inflationary pressures because of its deficit financed spending, transfer payments and tax cuts.
Based on the seven budget estimates released through 11/13 by the Congressional Budget Office and the Joint Committee on Taxation, the reconciliation will increase the deficit by a net $122 billion in 2022. This number will grow as the remaining cost estimates are completed.
- This understates the inflationary impact given that the bill includes at least $153 billion in transfer payments and tax cuts for individuals in 2022. This will fuel greater consumption, pushing inflation even higher.
- “It will make the labor market even hotter and create even more price pressure,’’ – Ethan Harris, head of global economics research at Bank of America (Bloomberg)
- The passage of Build Back Better would raise the inflation rate from 3.8% to 4% in 2022. – Analysis by Mark Zandi , Chief Economist, Moody’s Analytics See Table 3. (Note: this likely understates the impact given that the estimate was made before the inclusion of $50 billion in additional tax cuts in 2022.)
- “…the House bill as currently drafted will add ~$200 billion to next year's deficit alone. I don't see how we can do that when inflation is 2-3x our target.” – Ben Ritz, Director of the Progressive Policy Institute’s Center for Funding America’s Future (Twitter)
- “Right now, anything that expands aggregate demand is not warranted, not advisable. The economy seems to be operating pretty close to its capacity constraints.” – Michael Feroli, Chief U.S. economist for JPMorgan Chase (Bloomberg)
- "[Build Back Better] is more likely a small positive for inflation in 2022.” – Jason Furman, CEA Chair under President Obama (New York Times)
- Regarding BBB: “On net, I expect inflationary pressures. Why? a) $200 billion/year of upfront borrowing - spending comes way in advance of offsets; b) offsets won't temper demand much - taxes on corporations and those w/ $25m+ of income won't change consumption much; c) slow supply policies.” - Marc Goldwein, Head of Policy, Center for Responsible Federal Budget (Twitter)
- “I think that the policymakers in Washington unfortunately have almost every month been behind the curve. They said it was transitory; it doesn’t look so transitory. They said it was due to a few specific factors; doesn’t look to be a few specific factors. They said when September came and people went back to school, that the labor force would grow, and it didn’t happen.” – Larry Summers, former Treasury Secretary under President Clinton and President Obama economic adviser (The Hill)