Senator Joe Manchin was right. In September, he suggested that Democrats “hit the pause button” on their massive spending plans. At that time, the Build Back Better bill was $3.5 trillion — an inflationary bomb just waiting to go off.
Even after the Democrats cut the bill in half to $1.75 trillion, Manchin kept sounding the inflation alarm. He kept insisting that inflation wasn’t “transitory,” as Joe Biden still insists to this day. Manchin also asserted that it was fiscal madness to take on so much debt at this time.
Manchin’s September op-ed in the Wall Street Journal summed up the danger.
Those who believe such concerns are overstated should ask themselves: What do we do if the pandemic gets worse under the next viral mutation? What do we do if there is a financial crisis like the one that led to the Great Recession? What if we face a terrorist attack or major international conflict? How will America respond to such crises if we needlessly spend trillions of dollars today?
Instead of rushing to spend trillions on new government programs and additional stimulus funding, Congress should hit a strategic pause on the budget-reconciliation legislation. A pause is warranted because it will provide more clarity on the trajectory of the pandemic, and it will allow us to determine whether inflation is transitory or not. While some have suggested this reconciliation legislation must be passed now, I believe that making budgetary decisions under artificial political deadlines never leads to good policy or sound decisions.
No one — not one Democrat, including Joe Biden — has been able to answer that argument. There is no great crisis where we absolutely need to spend another $2 trillion on top of the $6 trillion we’ve already spent, money that hasn’t had sufficient time to work its way through the economic system. Hundreds of billions of dollars in pandemic relief that have been appropriated haven’t even been spent yet.
Indeed, much of the $46 billion Congress appropriated in rental assistance last summer hasn’t been given to renters in arrears.
Manchin appears clairvoyant, but he wasn’t alone. Anyone who wasn’t drunk or a Keynesian economist knew what would happen.
The causes of all this are clear: Democratic spending spurred a surge of demand at the same time supply was constricted by the pandemic and labor shortages caused by government incentives not to work. This will get worse with BBB’s taxes and regulation. Jerome Powell and the Fed contributed by cheering on this excessive spending and keeping an historically easy monetary policy long after the pandemic economic emergency had passed.
This inflation is exactly what Mr. Manchin warned about this summer, and he’s been vindicated. He should follow his instincts and shelve BBB for now, and make clear that before any revival next year it has to be honestly scored for its real spending burden. This would also be better for the Democratic Party and Mr. Biden, who now own the inflation that has occurred on their watch.
The inflation tar baby will stick to the Democrats as long as prices are an issue. And that promises to be a very long time.