The Biden administration’s Council of Economic Advisers Chair Cecilia Rouse said on Sunday that Americans will experience inflation because President Joe Biden, a Democrat, has been spending a massive amount of money.
Fox News host Chris Wallace noted that adjusting for the rate of inflation, Biden’s proposed $6 trillion in spending through his first 100 days in office is “more than six times what the nation spent to get us out of the Great Depression in the 1930s.”
Several minutes later, Wallace pointed out how former Treasury Secretary Larry Summers, who was an advisor to Presidents Bill Clinton and Barack Obama, has said that the prices of goods are already increasing.
“Can you guarantee with all the spending that we’re not going to have a new round of overheating the economy and serious inflation?” Wallace asked.
“These are very serious concerns and we know that coming out of an extremely deep recession that there are going to be bumps along the way. So we expect that there have been supply chain disruptions that will cause some transitory increases in prices,” Rouse answered. “We know that there are some places where employers are struggling to find workers because, let’s face it, we’re still in the middle of the pandemic. Some workers would like to go back to work but they don’t have child care, their schools are not open, and the pandemic is still out of control in certain parts of our country.”
“So when we get to the other side of this pandemic, I fully expect that our labor market will come back and be flourishing. That said, we do expect some transitory price increases. The Fed expects that as well. We do not see evidence that at the moment those are — have become what we call de-anchored so that we expect runaway inflation,” she claimed. “But that said, we know we have to be vigilant and we are watching the data. But for the time being, we expect at most transitory inflation, that is what we expect coming out of a big recession.”
CHRIS WALLACE, FOX NEWS SUNDAY ANCHOR: And joining us now, Cecilia Rouse, chair of the president’s Council of Economic Advisors.
Ms. Rouse, let’s start by putting President Biden’s plans in historical context. Adjusting for inflation, the programs passed during the New Deal cost $856 billion. Recovery from the great recession in 2009 cost $1.8 trillion.
But in just over 100 days, President Biden has proposed more than $6 trillion in new spending.
Ms. Rouse, you really want to spend more than six times what the nation spent to get us out of the Great Depression in the 1930s?
CECILIA ROUSE, COUNCIL OF ECONOMIC ADVISERS CHAIR: Well, thank you, Chris.
Let’s be clear, the first part of what President Biden was spending is the American Rescue Plan. We’re in an economic recession caused by a pandemic and that was critical support which went to families and businesses to help them get to the other side of the pandemic. And even more important, it provided the funding for an effective and comprehensive vaccination rollout.
It’s because of those shots in the arm, it’s because of the support the families and businesses have had that we started to see our economy come back. Last week’s numbers suggest our — a growth in the first quarter, increased by about 6 percent. We see that unemployment insurance claims are coming down. So the first tranche of that was to get us to the other side of the pandemic.
The other two parts are about investing in our future. What you — to put the spending in context is in the last four years, we’ve been disinvesting from our economy.
And so, what these plans do is they put — would put money into the foundations of growth. Those are infrastructure, research and development and innovation, education because we know human capital is so important, and yes, the support the families need in order to be able to go work because allowing workers to go to work, increasing our labor supply, is also critically important for sustaining our economy and ensuring we remain the most competitive economy in the world.
WALLACE: But you take my point, it’s six times what we spent in the New Deal, it’s three times what we spent for the great recession as you point out where the economy is right now.
I want to take a look at that because the economy is doing pretty well. Let’s put up the numbers. GDP in the first quarter rose, as you said, at an annual rate of 6.4 percent. The unemployment rate has dropped from a pandemic high of 14.7 percent now to 6 percent and the Federal Reserve is keeping short-term interest rates near zero.
With things going so well, why not trust the private sector to do its job and to keep the economy growing, people to get jobs, and get the country back on its way, do it by the private sector, not the public sector?
ROUSE: So, Chris, first of all, this is not an either/or. But those numbers reflect that we are just turning to come out of the recession. The numbers are, look, eye-popping because of what we call base effect because they were so very low last year but we’re not done yet. Next week, we will also get an employment report.
I expect to see robust job gains but I also expect we’re going to remind ourselves that we’re still 7 million or 8 million jobs down from where we were this time last year.
So we are definitely on the move. This is an economy that’s recovering. We are leading the world and that recovery but we’re not done yet.
WALLACE: Part of this, I think, Ms. Rouse, is a basic philosophical argument about how — what kind of a country we want to be.
Here is Senate Republican Leader Mitch McConnell this week. Take a look.
(BEGIN VIDEO CLIP)
MCCONNELL: Behind President Biden’s familiar face it’s like the most radical Washington Democrats have been handed the keys. And they’re trying to speed as far left as they can possibly go before American voters ask for the car back.
(END VIDEO CLIP)
WALLACE: President Biden is saying that he wants government to pay for child care. He wants government to pay for preschool and not just for the poor, but for the middle class, and it will be government that picks winners and losers.
Is that the kind of country we want to have, Ms. Rouse?
ROUSE: This — we want to have a country that has robust growth, that is widely shared, and that is innovating for the future. What we are proposing here are for a government to step in in places where we know the private sector doesn’t do so well.
For example, I think we’re the envy of the world in the speed with which the vaccinations, specifically those by Pfizer and Moderna, were rolled out, developed and rolled out in the past year. That was breathtaking. It’s the reason why we’re on path to — to get out of this pandemic — pandemic and in this recession.
The basic research that was the backbone of the vaccine developments was funded by the government. We know that when it comes to risky investments, the private sector will not make them. We know that when it comes to goods where the private sector can’t recoup all of the returns, the private sector doesn’t fully invest.
So the strategy here is to really create a partnership between the public sector and the private sector where for both sides to be making the investments that make the most sense, so that we can really increase growth. We know that the investments — when government invests in research, that crowds in the private sector. The private sector then builds on top of that and makes even further investment. This is not either/or, this is both/and.
WALLACE: So there’s not only big disagreement about the spending part of the Biden plan. There’s also a sharp disagreement about how you’re going to pay for it.
I want to put up the combined U.S. corporate tax rates. And when I say combined, both the federal tax rates and the state corporate tax rates. Take a look at this.
As it stands now with the Trump tax cuts, the U.S. is in the middle of industrial nations at 25.8 percent. But with the tax hike that President Biden is proposing, the U.S. corporate tax rate would once again be the highest in the industrial world at 32.3 percent.
Ms. Rouse, how can you argue that that isn’t going to hurt U.S. competitiveness in the corporate sphere? How can you argue that that isn’t going to drive some U.S. businesses overseas?
ROUSE: Well, I would say two things here. First is that President Biden fundamentally believes that government can be very effective and is important and that we all need to pay our fair share. And what we’ve seen over the past several decades is that the wealthiest Americans, the big corporations, are getting wealthier and they are contributing less in terms of federal revenue.
So, the first — the first point is to ensure that everybody pays their fair share, not to increase taxes on the middle class. So, not to increase taxes on anybody making less than $400,000 a year.
The second point is the corporate tax rate is really being proposed do not even go back to where it was in 2017, just to have an increase. And I think what we can also see is that with the tax cuts that have happened in 2017 when we reduced the corporate tax rate so dramatically, we have not seen a similar increase in investment and corporate competitiveness.
So President Biden is really saying, look, everyone should pay their fair share and yes, internationally, we don’t want to be disadvantaged. So he is also working with other countries so that we have a minimum tax internationally so that there’s not a race to the back —
WALLACE: But, Ms. Rouse, don’t you think — don’t you think that we’re going to be less competitive if we’re at — have the highest corporate tax rate in the world as opposed to in the middle of the industrial world? Doesn’t that just necessarily say we’ve become less competitive?
ROUSE: So we don’t — of course, we don’t want to, you know, hamper U.S. competitiveness. You know, to the contrary.
The idea is to ensure that corporations are paying their fair share, to button up some of the loopholes which have been really not — which have meant that corporations were actually putting more money offshore, off of the U.S. oil. And having a global minimum tax so that we’re working with our trading partners, working with the rest of the world so that corporations are paying their fair share worldwide.
We do not want to be hampering corporations but we do want to ensure that they are paying their fair share as well.
WALLACE: Then there is inflation. Former Treasury Secretary Larry Summers, who was an advisor both to President Bill Clinton and to Barack Obama, says this, and let’s put it up.
There are already labor shortages in food services and retail. We’re already seeing spikes in the price of lumber and housing.
And I can add to that, we’re also seeing spikes in the price of meat and used cars.
Can you guarantee with all the spending that we’re not going to have a new round of overheating the economy and serious inflation?
ROUSE: These are very serious concerns and we know that coming out of an extremely deep recession that they’re going to be bumps along the way. So we expect that there have been supply chain disruptions that will cause some transitory increases in prices.
We know that there are some places where employers are struggling to find workers because, let’s face it, we’re still in the middle of the pandemic. Some workers would like to go back to work but they don’t have child care, their schools are not open, and the pandemic is still out of control in certain parts of our country.
So when we get to the other side of this pandemic, I fully expect that our labor market will come back and be flourishing. That said, we do expect some transitory price increases. The Fed expects that as well. We do not see evidence that at the moment those are — have become what we call de-anchored so that we expect runaway inflation.
But that said, we know we have to be vigilant and we are watching the data. But for the time being, we expect at most transitory inflation, that is what we expect coming out of a big recession.
WALLACE: I have less than a minute left and I want to ask you one strategy question. There are reports that the president is willing to break up, particularly the infrastructure plan, into chunks to get at least some of it passed with bipartisan support and that Senate Democrats are saying slow, steady, and piecemeal.
As a matter of strategy, is the president willing to break infrastructure into various pieces? And overall, is he willing to settle for considerably less than the $2.25 trillion?
ROUSE: What the president has said is what’s really important, is that we act now. That inaction is not an — is not an option. And so he is willing to work with Congress. He’s open to many ideas.
But he believes, fundamentally, we need to be making these kinds of investments in our country. We need to be, you know, stoking and supporting the kind of innovation that we need to in order to address existential threats such as climate change.
ROUSE: We need to be investing in our people and we need to be rebuilding infrastructure.
So, the president has said we need to be making these investments. We’ve been disinvesting over the past 40, 50 years. What’s not an option is inaction and he’s open to working with all members of Congress to make that happen.
WALLACE: Ms. Rouse, thank you. Thanks for your time. Please come back.
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