White House seeks reassurance to Democrats worried about inflation issues on Biden’s agenda

In a new note to lawmakers, National Economic Council director Brian Deese called on both sides of the administration’s infrastructure plan to “long-term investments that span the decade and will lead to the kind of long-term sustainable economic growth that eases bottlenecks and inflationary pressures. “

Consumer prices soared in June at the fastest annual rate since 2008, and everything from used cars and plane tickets, to washing machines and bacon, became more expensive in as inflation increases. Some economists have argued that this period of inflation will be temporary, but it has become a key talking point for Republicans hoping to slow Biden’s agenda.

The White House distributed the memo as the Senate passed the bipartisan $ 1.2 trillion infrastructure bill that spends on physical infrastructure such as roads, bridges and broadband internet. Next on the agenda is a $ 3.5 trillion budget resolution that contains much of Biden’s other priorities, which the Senate began to consider Tuesday afternoon.

“When you look at the current state of the economy, the best thing we can do is make long-term investments,” Deese, who heads the National Economic Council, said in an interview with CNN.

Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen have joined the White House in saying the current spike in inflation will prove temporary as companies increase their supply to meet the renewed demand. But some moderate Democrats – like West Virginia Senator Joe Manchin – have expressed skepticism about the effects of the $ 3.5 trillion in new spending on “human infrastructure” in the new budget bill.

Biden needs the unanimous support of the 50-member Democratic Senate Conference to secure passage of the $ 3.5 trillion budget bill, which includes major investments in education, child care, healthcare and adaptation to climate change which Biden says will counter inflation by increasing economic productivity.

Some things, such as an extension of the expanded child tax credit passed in a previous Covid relief bill, would boost consumer demand. But Deese said that would be overshadowed by the greater near-term reduction in demand pressures as temporary relief spending for covids wears off.

Deese’s memo quotes former Democratic Treasurer Larry Summers – one of the loudest voices warning against inflation in recent months – as praising the bipartisan physical infrastructure bill as “a epic productivity improvement opportunity ”.

He also quotes Furman who said the bipartisan bill passed by the Senate on Tuesday “would not be inflationary because investments are spread over time, mostly paid, and would increase the economy’s productive capacity.”