ICYMI: ROOSEVELT INSTITUTE: PUBLIC INVESTMENTS WOULD EASE INFLATIONARY PRESSURE

The Build Back Better Act’s Public Investments Could Put U.S. on Path to a Historic, More Equitable Boom

The investments in the Build Back Better Act would ease inflationary pressures on the U.S. economy, while a failure to pass them will only weaken the economy, according to a new report released yesterday by the Roosevelt Institute. While the stimulus measures from earlier this year  set the stage for a rapid recovery, businesses are still experiencing supply bottlenecks, which markets will resolve. However, inflation in other key areas like housing and healthcare results from long-standing problems in lack of supply — the report says the solution to this inflation is greater public investment.

The economists who authored the report argue that significant cuts to the Build Back Better Act will result in a weaker recovery and a permanently weaker economy. However, if the Act is passed with substantial provisions, the economy could experience a historic boom.

KEY POINTS: 

  • Much of the inflation we are seeing today will abate on its own as supply bottlenecks are resolved and businesses respond to higher prices by raising production. In other areas, such as housing and health care, rising prices are the result of long-standing problems of restricted supply and excessive market power. Here, the solution is public investment and policy changes to expand supply.

  • The COVID-19 pandemic disrupted our economy in ways never before seen, but the  extraordinary stimulus measures of the American Rescue Plan have set the stage for  what could be a rapid recovery—with the right policy choices, and absent further  upheaval from COVID variants. With continued public investment and support from the Federal Reserve, the economy could soon not only return to its pre-pandemic conditions but move past them into a historic boom.

  • If inflation fears lead the Fed to raise rates aggressively or Congress to scale back or abandon the Build Back Better agenda, those policy decisions will turn today’s temporary disruptions into a permanently weaker economy with higher unemployment and greater racial and income inequality. On the other hand, if policymakers recognize today’s inflation for what it is—the short-term friction of a rapid recovery—then today’s inflation may become a footnote to the story of a historic economic boom.

Read the full brief here.

The investments in President Biden’s full Build Back Better agenda will create jobs, lower costs, and lower taxes for working families. 

  • The Build Back Better agenda will create millions of jobs: 

  • The Build Back Better agenda will lower taxes for middle class families: 

    • It will expand the Child Tax Credit, lowering taxes for middle class families by providing 39 million households and nearly 90% of children in the U.S. a major tax cut and cutting the child poverty rate in half.

  • The Build Back Better agenda will lower costs for working people:  

    • It will lower prescription drug costs for Americans by letting Medicare negotiate drug prices, so consumers are no longer at the whim of pharmaceutical companies.

    • It will lower child care costs — which cost parents $30-35 billion in income before the pandemic. Access to affordable child care could increase the lifetime earnings for women with children by nearly $100,000.

    • It will lower health care costs and premiums for those buying coverage through the ACA by extending the American Rescue Plan’s cost savings; adding dental, vision, and hearing coverage to Medicare; and closing the Medicaid gap for low-income Americans.

    • It will lower education costs by making two years of community college tuition-free and making universal preschool a reality.

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