Inflation: What didn’t cause it?
In the year to June, the Consumer Price Index rose by 8.5%. What caused this? Let us first eliminate some answers by looking at what didn’t cause this. As I…
March 2021 saw the passage of the $1.9 trillion American Rescue Plan (ARP). At the time, the Biden administration touted a study by Moody’s Analytics, which:
“…projects that the President’s Plan will bring the economy to full employment a full year earlier than a baseline without additional fiscal stimulus. This is significant because it’s a difference of 4 million jobs in 2021.” [Emphasis added]
These 4 million additional jobs were a key selling point of the legislation. On February 3, the White House stated that passing the ARP would mean “a difference of 4 million jobs in 2021.” House Speaker Nancy Pelosi (D-CA) repeated that claim, stating that “if we do not enact this package, the results could be catastrophic,” including “4 million fewer jobs.”
Last Friday, the Bureau of Labor Statistics (BLS) released its December jobs report and closed the books on 2021’s labor market. There was no sign of those 4 million additional jobs.
As Matt Weidinger notes for the American Enterprise Institute:
The nonpartisan Congressional Budget Office projected on February 1, 2021 that monthly job growth in 2021 (specifically, the change in payroll employment between the fourth quarters of 2020 and 2021) would average 521,000 — without enactment of the American Rescue Plan. As displayed in the chart below, that would mean a gain of 6.252 million jobs over those four quarters. With the release of today’s data for December 2021, we now know payroll employment in the fourth quarter of 2021 averaged 148.735 million — an increase of 6.116 million compared with the average of 142.619 million in the fourth quarter of 2020. That means the job growth the President praised this week has fallen 136,000 jobs short of what was expected under the policies he inherited.
But the story doesn’t end there…as the chart above displays, not one of those four million additional jobs supposedly resulting from that $1.9 trillion spending plan has appeared, as job creation in 2021 did not even match CBO’s projection without that legislation. But that hasn’t kept the President from rebranding what Democrats formerly described as a “dire” and “catastrophic” outcome when selling their massive spending plan as now being a sign of “unique economic strength.”
In other words, employment actually did slightly worse with the ARP than the White House and Democratic leaders said it would do without it. The ARP was a $1.9 trillion dud.