In a new research paper from Republicans on the Congressional Joint Economic Committee, evidence is presented that inflation could worsen if Congress continues to push government spending higher.
The Republican members of the JEC said that prices are rising at their fastest pace in decades, creating concern about inflation. They believe that new government spending measures, including the proposed $3.5 trillion budget resolution, could accelerate it.
“After surveying the evidence, this paper concludes that rising prices are likely a mix of transitory inflation and more lasting inflation caused by government stimulus. While increased costs for American producers will likely subside after global supply chains adjust, demand-driven inflation may be exacerbated even further if government stimulus continues to boost household income before the labor market recovers. Tax increases that further constrain business activity could also make inflation worse,” the paper states.
The paper, called the Economics of Inflation and the Risks of Ballooning Government Spending, was authored by Jackie Benson, senior economist for the JEC, Congress’s bicameral economic research center.
“We urge Congress to consider the inflationary risks of new stimulus. Rising prices are harming American families by reducing their earnings and undercutting their purchasing power. The American people would be better served by policies geared toward returning Americans to work,” the JEC Republicans said in a statement. U.S. Sen. Mike Lee (R-UT) is the ranking member on the JEC.