President Biden on Wednesday conceded that inflation is at a three-decade high because “people have more money now” as a result of his $1.9 trillion COVID-19 stimulus legislation, recognizing a central point made by people who are arguing against a nearly $2 trillion sequel.
Biden unexpectedly endorsed the stance of his critics who have said the US dollar is losing its buying power as a result of the government printing money to cover COVID-19 aid.
The president said stimulus funds that he signed into law are in part to blame for demand exceeding the supply of goods, causing a backlog at major US ports and the highest rate of annual inflation since 1990.
“The irony is people have more money now because of the first major piece of legislation I passed. You all got checks for $1,400. You got checks for a whole range of things,” Biden said during a speech in Baltimore.
“If you’re a mom and you have kids under the age of 7, you get $300 a month and if it’s over 7 to 17, you’re getting $360 a month,” he said, misstating the second amount, which is $250 per month.
“It changes people’s lives. But what happens if there’s nothing to buy and you got more money to compete for getting [goods]? It creates a real problem,” Biden said.
“On the one hand, we’re facing new disruptions to our supplies. At the same time, we’re also experiencing higher demand for goods because wages are up as well as people have money in the bank. And because of the strength of our economic recovery, American families have been able to buy more products.”
But the president said that he believes inflation will subside, arguing that many people temporarily are sitting at home ordering goods online rather than blowing their money at restaurants and bars.
“[People] are not going out to dinner and lunch and going to local bars because of COVID. So what are they doing? They’re staying home and ordering online and they’re buying product.” Biden said.
“Well with more people with money buying product and less product to buy, what happens? The supply chain’s the reason, the answer is you guys, I’ll get to that in a minute. But what happens? Prices go up.”
Biden said that “more products are being delivered than ever before — that’s because people have little more breathing room than they did last year. And that’s a good thing. But it also means we’ve got higher demand for goods at the same time we’re facing disruptions in the supplies to make those goods. This is a recipe for delays and for higher prices.”
Biden acknowledged public frustration.
“People are feeling it — they are feeling it,” Biden said. “Did you ever think you’d be paying this much for a gallon of gas? In some parts of California they’re paying $4.50 a gallon. That’s why it’s so important we do everything in our power to stabilize the supply chain.”
Earlier Wednesday, Biden urged Congress to tackle the highest annual inflation rate since 1990 by approving a bill with nearly $2 trillion in new social and environmental spending. That spending arguably would be paid for by tougher and broader IRS enforcement and new taxes on businesses and the rich.
Biden is preparing to sign yet another large piece of legislation — a $1.2 trillion bipartisan infrastructure bill that passed Congress on Friday. The Congressional Budget Office said $256 billion of the bill isn’t paid for, potentially worsening inflation.
The infrastructure bill includes $17 billion for port infrastructure and $25 billion to improve airports, which Biden said will alleviate the supply chain crunch.
The pending social spending bill, meanwhile, contains new subsidies for child care, home health care, housing, education and paid leave and would extend the enhanced child tax credit, which formerly was $2,000 per child before being bumped to $3,000, or $3,600 for kids up to 6 years old.
Skeptics including centrist Democratic Sen. Joe Manchin of West Virginia, whose vote is needed for the large bill to pass the evenly divided Senate, say they’re concerned that more government spending would further worsen inflation.
“By all accounts, the threat posed by record inflation to the American people is not ‘transitory’ and is instead getting worse,” Manchin tweeted Wednesday. “From the grocery store to the gas pump, Americans know the inflation tax is real and DC can no longer ignore the economic pain Americans feel every day.”
Biden recognized the contribution of government aid to inflation after the Labor Department’s Consumer Price Index jumped 6.2 percent in October from a year earlier, reflecting an increase in the cost of goods and services as well as energy and food. Fuel costs surged 30 percent.