Economists say American Rescue Plan contributed to inflation

WASHINGTON (TND) — It’s been one year since Democrats took a victory lap after passing the nearly $2 trillion American Rescue Plan, with some saying it would help the party win this year’s midterms.

But now, their majorities in Congress are in peril as economists say the plan is partly to blame for the country’s inflation.

“Americans will see what we did here, what you did Mr. President and they will feel the impact of this bill for generations to come,” Vice President Kamala Harris said following the passage of the act in Spring 2021.

At the time, Democrats touted the $1.9 trillion plan, aimed at reviving the U.S. economy and helping Americans during the pandemic. But there were early warnings about what the plan’s impact could be on the economy and inflation out the gate.

“This is the least responsible macroeconomic policy we’ve had in the last 40 years,” former U.S. Treasury secretary Larry Summers said.

Treasury Secretary Janet Yellen said last year that policy-making is about recognizing and addressing risks.

“Is there a risk of inflation? I think there's a small risk and I think it's manageable,” Yellen said.

Now, some economists say the American Rescue Plan is partly to blame for the rising inflation the country is seeing.

The Personal Consumption Expenditures Index from February shows that prices rose by 6.4% from one year ago – the fastest pace since 1982.

This comes as a recent poll from the Associated Press shows that about seven in 10 Americans say the country’s economy is in poor shape – with only 24% saying President Joe Biden’s policies have done more to help it.

“Under President Biden, we’ve been able to increase the number of jobs, just about every month, that are produced in this country. We’ve been able to lower the unemployment rate. So those economic indicators are very strong,” said Rep. Joaquin Castro, D-Texas.

Pew Research reports that 78% of voters say the economy is very important to their vote this year, with 90% of Republicans surveyed agreeing.

“I expect most elected officials to be concerned because bad economic times are not good for incumbents,” said economist Jeffery Miron. “I think there’s a pretty good chance inflation will still be somewhat high and the economy may be slowing right around the time the midterms are happening.”

To add to the inflation concern, the war between Russia and Ukraine will continue to impact the U.S. economy and could cause the price of things like food and gas to rise for at least the next few months.