Exclusive-Rating agencies say Biden’s spending plans will not add to inflationary pressure

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(Businesshala) – US President Joe Biden’s infrastructure and social spending laws will not add to inflationary pressures in the US economy, economists and analysts at major ratings agencies told Businesshala on Tuesday.

FILE PHOTO: US President Joe Biden comments on the state of his US rescue plan from the State Dining Room at the White House in Washington, DC, US, May 5, 2021. Businesshala / Jonathan Ernst

Biden has spent the past few months promoting the merits of both pieces of legislation — a $1.75 trillion “Build Back Better” plan and a separate $1 trillion infrastructure plan.

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William Foster, vice president and senior credit officer (sovereign risk) at Moody’s Investors Service, told Businesshala that the two parts of the law “should have no real impact on inflation”.

Foster said the impact of spending packages on the fiscal deficit would be minimal because they would be spread over a relatively long time horizon.

Senator Joe Manchin, a centrist Democrat, has previously raised inflation concerns regarding Biden’s social spending plan, with a report earlier this month suggesting he may delay passage of the Build Back Better legislation. Huh.

“The bills do not add to inflationary pressures,” said Mark Zandi, chief economist at Moody’s Analytics, because the policies help lift long-term economic growth through stronger productivity and labor force growth, and thereby offset inflation. ” Operates independently of the parent company’s ratings business.

Zandi said the cost of both the infrastructure and the social spending law were sustainable.

“The bills are largely paid through higher taxes on multinational corporations and affluent households, and more than paid if the benefits of the additional increase and the consequent impact on the government’s financial position are considered”. Interview.

Charles Seville, senior director at Fitch Ratings and America’s sovereign co-head, said the two pieces of legislation “will neither boost nor reduce inflation in the short term.”

Government spending will still add less to demand in 2022 than in 2021, and in the long run, the social spending law could increase labor supply through provisions such as childcare and productivity, Seville told Businesshala.

The House of Representatives passed a $1 trillion infrastructure package earlier this month after the Senate approved it in August. Biden signed the bill into law on Monday.

The Build Back Better package includes provisions on childcare and preschool, eldercare, healthcare, prescription drug pricing, and immigration.

“The deficit will still be small in fiscal 2022 as pandemic relief spending is reduced and tax revenues increase from economic recovery,” Seville said. “But the law (Build Back Better) does not permanently fund all initiatives, especially if these are scaled up and do not sunset, meaning they will be funded by more borrowing.”

The Congressional Budget Office anticipates publishing a full cost estimate for the Build Back Better Plan by Friday, November 19. Biden said on Tuesday he expects the Build Back Better legislation to be passed within a week.

Reporting by Kanishk Singh in Bengaluru; Editing by Dan Burns and Lincoln Feast.


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