Jared BernsteinVerified account

Them’s the facts on BBB’s near- and longer-term inflationary impacts. It’s pretty much what @POTUS said a while ago: “if your primary concern right now is inflation, you should be even more enthusiastic about this plan.”

Note that these programs’ cost savings for families will ramp up over multiple years and some (care, pre-K) help boost labor supply, which, over the longer-term, is both pro-growth and anti-inflationary.

--Saves Americans thousands of dollars by negotiating prescription drug prices, e.g., limiting cost-sharing for insulin products to be no higher than $35 starting in 2023

--Leads to the construction of additional housing units starting in 2022, which will ease the cost of housing --Lowers the cost of hearing coverage for seniors starting in 2023

But even amid strong demand, we know many families struggle w/ key costs to their budgets. Here again, BBB helps right outta the gate: --Starts cutting child care costs in 2022. --Makes preschool free for many families starting in 2022, saving the typical family $8,600.

I mean, I worry about everything, but we’ve got the strongest labor market in decades, solid household balance sheets, and this pass-the-baton-from-public-to-private always occurs at this stage of expansion. And again, the implications for easing inflation are helpful.

The conclusion is that the impact of gov’t spending on growth, demand, prices, including BBB, will be a big negative relative to the past few years. Shouldn’t we be worried about this?!?

About 2/3 of that 0.6% is the continuation of the Child Tax Credit, so no new impulse there. That leaves 0.2%. But that must be factored into the very large 9% negative fiscal impulse from the fading of Rescue Plan supports.

First, some say BBBs ’22 spending will generate more inflation. They mistakenly base this on CBOs score that BBB spends 0.6% of GDP next year. But that’s not its “fiscal impulse”—the key macro determinant of its price-pressure impact.

Having spent most of last Friday discussing inflation, I conclude that there’s some confusion around the potential inflationary (non-)impacts of Building Back Better. So, a (somewhat dense) thread to hopefully clarify.

...there's simply no denying the role of economic policy--shots in arms/checks in pockets/monetary support too of course--in shaping the very uniquely strong US labor market, delivering real bargaining clout to working people, a touchstone of Bidenomics.

Note the sharp contrast between this V-shaped EPOP (emp/pop, 25-54 yo's) recovery and the much slower ones in recent cycles. Yes, every recession/recovery is different (cue Tolstoy), but...

Much to amplify in our jobs thread this AM but punchline is straightforward: 4.2% unemployment, way ahead of schedule, is providing long-awaited bargaining clout to middle and low-workers, a key goal of Bidenomics.https://twitter.com/WhiteHouseCEA/status/1466777149898203139 …

I consider this to be an extremely important set of facts about current real income dynamics. As the @POTUS speech stresses (thread on that coming next), we are doing all we can to ameliorate price pressures--and we're getting results! But the figure adds critical perspective.

The top line shows real inc gains for these families up ~$2.5K; the bottom line shows that absent this support, most fams avg real inc would be DOWN ~$1K, and the diff betw the bottom two lines shows the impact of higher inflation.