Originally posted by: MaxFlavor
1. I wanted you to answer the same question I've ask 5 or 6 times already. How did the Infrastructure act and the Inflation Reduction ACT increase inflation when inflation fell after the money began to flow into the economy?
Here is the post where you told me it did, and my response to jog your memory.
"Oh little things like adding 8.3 trillion to the national debt. This + the Fed's easy money policy was the root casue of our 40 year record inflation and decline in real wages.. That's kind of the definition of reckless spending."
2. The inflation rate was 6.8% in November of 2021 when the Infrastructure Act was passed, it was at 2.9% in December 2024.
3. By November of 2023, 80% of the funds were still left to be awarded.
4. As the "reckless spending" began to work it's way into the economy the inflation rate fell, your hypothesis doesn't hold up very well to a simple timeline."
1 I'm sorry you've been asking me 5 or 6 times about one of my posts. I actually have a pretty busy life and don't have a lot of time to read or respond to posts here. When I find a topic that interests me I try to put my 2 cents in and hopfully include some links to an authoritative source. Then I often don't go back. My bad. I can't go back and forth in conversation much here either, espeically when one "contributor" specializes in nasty attacks against the poster instead of the post. Then it's just a ttotal waste of time instead of mostly a waste of time.
In any event, in the original post you referred to, I was just pointing out the several massive new spending programs from the Biden administration that was the reckless spending that increased the national debt by 8.3 trillion which I was specifically mentioning. Obviously not every dollar of every program that was part of the entire 8.3 trillion-dollar Biden deficit influenced the 8% average inflation rate for 2022. You're right. Much of that money had not yet been spent. Some of it will never be spent. Yet still, there was a tremendous amount of new borrowed money pumped into the economy between 1/20/2021 and 12/312022.
Interest rates were also extraordinarily low. You'll also note that I pointed out it was a combination of fiscal and monetary policy that was the root cause of the 40-year peak inflation rate. At the time money from the so-called inflation reduction act started to hit, the Federal Reserve had already realized the huge mistake the Fed and the President and the Democrat congress had made because of:
A. The high velocity of the initial money spend plus
B. the FED easy money policy with artificially low interest rates +
C. the fact the economy had already improved significantly and the trend was already positive for employment and economic growth.
These are the key variables that influenced Biden’s inflation and charted thoughout 2022.
The chart from Kinlow et al. shows Federal spending as the leading cause of the 2022 inflation by far with this example from February. You may choose to not believe the math. I think it’s solid. And, it’s even worse when you throw in the things the Fed has some control over…. Money Supply, Interest Rates, Yield Curve it’s up to over 60% Then how much of the 14% ‘Inflation Expectations’ should we add to the 60% because of the Federal Government’s blame for creating and handling of the inflation problem from day 1?
If the problem was really ‘Supply Chain’ as some now claim, then we’d expect the “Producer Price” component to be the biggest percent of the total and far more than the government categories…. but at 10% it’s clearly not….and that’s easy to measure.
2. 3. & 4. Now, questions you had that I labeled 2, 3 & 4 I think are all the same as the underlying question in #1. If the cause was Government spending, why did inflation lower when the Inflation Reduction Act kicked in? Simple. It had to do with 11 Federal Reserve rate hikes. Remember, fiscal AND montary policy, not just spending. Still, the velocity of spend wasn’t nearly as fast as it was on the earlier programs. In fact, a lot of the IRA is spent in the latter half of the decade.
So, it’s similar to the answer that I gave for a similar question about “Why when Trump pumped money into the economy it wasn’t inflationary and when Biden did it was”. These were very different situations with Trump dealing with a complete shutdown, 16% percent unemployment, and a collapse in demand while Biden was dealt a recovering economy with 6.3% employment. Just like 2022 with 8% inflation, the sugar high of the Recovery Act and low interest rates was a lot different economic situation than the lower velocity spend and high interest rates of 2024. It's apples and oranges. Still, when Trump took over as Presiden this time, the inflation rate was 3%. You make that sound awesome when it's still 50% above the Fed target and higher than at any point during the 1st Trump administration or the Obama administration. So, believe there are still lingering effects from the big spend.
I hope I answered your questions. Unfortunately, I've already spent too much time on this one. I wasn't trying to ignore you, but my schedule makes it impossible to engage in a conversation here so I just post and run and come back when I can. I only hope that the Fed isn't creating a problem for us by keeping Interest Rates too high today. But that's a topic for another day.
Happy Easter!
