In Washington, the entire agenda of the US government, from fighting wars to fighting climate change, is held up over budget concerns.
President Joe Biden’s plans to invest in everything from infrastructure and internet access to infant care and semiconductor innovation remain on hold as lawmakers dicker about the effects on the budget. In a tight Senate, centrist Democrats have expressed concerns that the administration’s plans could be too inflationary—or just too much spending.
The closer one looks at economic forecasts and the out-of-context price tag of $3.5 trillion that’s been thrown around in budget discussions, the less one has to fear. There may be objections to the spending program, but it’s not out of the ordinary in context of the American budget.
Is current spending driving inflation?
Consider some research fresh out of the Federal Reserve Bank of San Francisco, where economists looked at the effect of the last…