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Thursday, December 2, 2021
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    IS INFLATION HAS BECOME A HEADACHE FOR CONSUMERS?

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    Inflation happens when prices broadly go up. The Biden has argued that its infrastructure and broader economic package will slow rapid price increase. It will take time. In 2020, as Covid-19 spread it was like pulling the plug on the global economy. Factories around the world shut down people stopped going out to restaurants, airlines grounded flights. Millions of people were laid off as business disappeared practically overnight. The unemployment rate in America shot up to nearly 15% from about 3.5% in February 2020. It was the sharpest economic contraction on record.


    A wide range of economists agree with the president. They generally accept his argument that in the long run. The bill and his infrastructure plan could make businesses and their workers more productive which would help to ease inflation as more goods and services are produced across the economy. Many researchers including a forecasting firm that Mr. Biden often cites to support the economic benefits of his proposals. The bill is structured in a way that could add to inflation next year before prices have had time to cool off.

    Republicans have criticized Mr. Biden on inflation for months seeking his sprawling proposal to fight climate change guarantee universal prekindergarten expand access to health insurance cap child care costs for low earners and the middle class and extend a lucrative new tax break for parents. They have argued that the bill’s spending much of which is spread over several years will push prices higher. Many economists say it could create a short-term stimulus because the plan is structured to raise money gradually by taxing wealthier. Americans who are less likely to spend each additional dollar they have and redistribute it quickly to people who earn less and are more likely to spend newfound cash.

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    It’s more likely a small positive for inflation in 2022 because it’s preventing a big reduction in spending that would otherwise have happened that year,” said Jason Furman. An economist at Harvard and a former chairman of the White House Council of Economic Advisers during the Obama administration. The pros and cons of Build Back Better with regard to improvements in climate change and opportunity vastly dwarf any pros or cons on inflation. White House economists have countered those arguments.

    If the bill pass they say, it would do relatively little to spur increased consumer spending next year and not nearly enough to fully offset the loss of government stimulus to the economy as pandemic aid expires as pandemic. The program spends more heavily next year is a feature, they say, because it will partly blunt the economic drag as fiscal help fades. They note that the bill is intended to be offset completely by tax increases and other revenue savings.

    Inflation looms more significantly in the near term because it is currently high and if it remains that way for an extended period consumers could change their behaviors and expectations locking in faster gains. People who worry about the proposals say that 2022 is the wrong time to hand households more money.The White House says the provisions of the bill that put money in families’ pockets such as child care help are not simple stimulus. They will allow caregivers into the labor market they argue an investment in the economy’s future that will allow it to produce more with time.

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