Jun 27, 2021 - Economy

Economists unworried infrastructure will boost inflation

Economists Jason Furman Larry Summers are seen in a pair of face-to-face headshots.

Jason Furman (left) and Larry Summers. Photos: Andrew Harrer/Bloomberg (left); Jim Davis/The Boston Globe

Some Democratic economists who questioned the size of President Biden’s $1.9 trillion coronavirus relief bill — including Larry Summers — are now offering their full-throated support for his bipartisan infrastructure proposal.

Why it matters: Support for the package, undercut when Biden issued a veto threat last week, is fickle. Endorsements from both the political and policy worlds will be key to convincing nervous lawmakers to back or stick with it.

  • "The bipartisan infrastructure proposal provides an epic opportunity for productivity enhancement," Summers, a former Democratic Treasury secretary and director of the National Economic Council, told Axios.
  • "It should take less time — and not more time — to get from Washington to Boston than it did four decades ago," he said.
  • Jason Furman, a chair of the Council of Economic Advisers under President Obama, called the proposed $579 billion in new spending "a step in the right direction.”
  • “It would not be inflationary because the investments are spread out over time, mostly paid for and would expand the productive capacity of the economy.”

The big picture: With inflation exceeding expectations for the last few months, Republicans have been blaming Biden’s March $1.9 trillion American Rescue Plan for fueling price spikes.

  • They've even borrowed critiques from Summers to make their point.
  • Sen. John Thune (R-S.D) took to the Senate floor this month to note “more than one liberal economist warned about the size of Democrats’ spending plan."
  • While Summers has irked the White House with his persistent inflation warnings, Biden and other officials continue to seek his counsel and listen to his views.

Driving the news: The bipartisan deal — which Biden both endorsed and threatened to reject in the same breath — is hanging by a thread, just days after the group of 21 Democratic and Republican senators celebrated a deal.

  • Biden spoiled the party by saying he viewed the $579 billion package as linked to a second, potentially $6 trillion-dollar package Democrats want to pass through the partisan reconciliation process.
  • The president tried to clean up the mess in a rare Saturday statement that all but contradicted his Thursday threat. “The bottom line is this: I gave my word to support the infrastructure plan, and that's what I intend to do," he said.

What they're saying:

  • “It was a surprise, to say the least, that those two got linked, and I’m glad they’ve now been de-linked," Sen. Rob Portman (R-Ohio) said Sunday on ABC's "This Week." "It’s very clear that we can go forward with a bipartisan bill that’s broadly popular, not just among members of Congress, but the American people."
  • Sen. Mitt Romney (R-Utah) said on CNN's "State of the Union" that "I do trust the president. At the same time, I recognize that he and his Democratic colleagues want more than that."
  • "There has been a doubt in my mind that (Biden) is anxious for this bill to pass and for him to sign it, and I look forward to being there when he does," Sen. Joe Manchin (D-W.Va.) said on "This Week."
Go deeper