WASHINGTON (AP) — In the face of political attacks on rising costs, President Joe Biden has exaggerated his role in reducing the federal deficit and skirted responsibility by saying that a flood of government spending in the economy has only no impact on price increases. This is indeed the case.
Congressional Republicans, meanwhile, went too far in blaming Biden for soaring gas prices.
A look at rhetoric and reality:
BIDEN: ‘Last year the deficit fell for the first time since 2015. It fell $360 billion last year and this year it’s on track to fall more than $1 trillion after four straight years of growing deficits before I took office. We are now on track to witness the largest ever decline in a deficit in American history.” – remarks Tuesday.
THE FACTS: It’s not as big as it sounds.
While it’s true that the deficit could end up falling by more than $1 trillion, the decline primarily reflects the improving economy as the pandemic subsided, not tax and spending decisions. of the White House or Biden’s Congress. The government is no longer sending stimulus checks and additional unemployment benefits as it has for two years. And tax revenues rose as millions of Americans found jobs and got pay raises. As a result, the Committee for a Responsible Federal Budget projects that the federal government’s annual deficit will fall to $1.2 trillion this year, from $2.8 trillion in 2021 and a record $3 trillion in 2020.
Even with this drop, the deficit would still be at one of the highest levels in history.
Part of the drop is also due to a COVID-era policy change that essentially postponed some tax collections. The government is now collecting significantly more payroll taxes, which fund Social Security and Medicare, after allowing businesses to defer them during the pandemic.
In February, for example, government tax revenue jumped 17%, while spending fell 9% from a year ago. Spending on unemployment assistance fell $41 billion last month from February 2021, after an additional $300 in weekly unemployment benefits ended in September.
BIDEN, addressing political rhetoric on rising prices: “So I’m sick of this stuff. We need to talk about it because the American people think the reason for inflation is that the government spending more money. Just wrong.” — remarks Friday at a House Democrats conference in Philadelphia.
REPUBLICAN NATIONAL COMMITTEE: “Prices are rising and Americans are footing the bill. No spring road trips because of #Bidenflation.” – tweet Tuesday.
THE FACTS: Biden skirts reality. Government spending has been a clear factor in the rise in consumer prices, but it is not the only one.
Biden signed a $1.9 trillion coronavirus relief package known as the US bailout last year – and many economists say it has driven inflation higher than it is would otherwise. There are multiple sources of inflation, including global supply chain issues, the pandemic, Federal Reserve stimulus, and now the Russian war in Ukraine.
But the problem is that Biden pumped more money into the economy than he could handle. Administration officials said before the relief package was passed that the biggest risk was doing too little to help the economy rather than doing too much. The implicit risk was inflation, although the trade-off was faster hiring and stronger growth. Biden has all three: hiring, growth and inflation.
Harvard University economists Jason Furman and Larry Summers – both officials of former Democratic administrations – have warned of rising inflation due to the size of the relief package. Many conservative economists joined them, including Michael Strain of the American Enterprise Institute.
Republicans are now presenting rising consumer prices as the direct and unique result of “bidenflation”. It’s wrong. But Biden is wrong to say government spending has nothing to do with it.
REPUBLICAN SENATE LEADER MITCH MCCONNELL: ‘No one is buying the Democrats’ effort to blame 14 months of failed policies on three weeks of crisis in Europe. Inflation and gas prices were skyrocketing and hurting families well before the end of last month. The White House needs to stop trying to deny their mistakes and start fixing them.” – tweet Tuesday.
REPUBLICAN CHAMBER LEADER KEVIN MCCARTHY: “Democrats want to blame Russia for soaring prices. But the truth is, their disconnected policies are why we’re here in the first place. You remember what happened? passed day one with one-party rule? The president canceled the Keystone pipeline, then he stopped new oil and gas leases on federal lands and waters.” — Speech of March 8.
THE FACTS: Republican congressional leaders are exaggerating Biden’s ability to influence energy prices and the impact of the cancellation of the Keystone pipeline.
Gasoline prices have been rising alongside oil prices since the spring of 2020 as demand has grown faster than global production as economies try to shake off the pandemic. More people are driving and flying, and businesses are returning to pre-pandemic levels of activity, leading to greater energy consumption, driving up prices.
The price of oil is fixed on the world market. Even the major producers – the United States, Saudi Arabia and Russia – do not set the price, although they may try to adjust production up or down, a process that takes time even when it works. US production fell sharply in 2020, but that’s not because of anything then-President Donald Trump did; that’s because the pandemic has crushed demand, forcing producers to idle some of their wells rather than sell their oil too low. US oil production has doubled since 2011, but that hasn’t stopped oil from reaching and surpassing $100 a barrel.
US oil production has fallen about 1% from 2020 to 2021, not the dramatic fall described by some of Biden’s critics. The nationwide average price of gasoline has risen about 80 cents from a month ago, and analysts attribute almost all of that to the prospect of limiting Russia’s oil exports. McConnell and many other Republicans lobbied to ban US imports of Russian oil even before Biden acted.
The Keystone XL pipeline was designed to transport up to 830,000 barrels of oil per day from Canada and North Dakota to refineries along the Gulf Coast. The United States consumed nearly 20 million barrels of oil a day last year, and global consumption was close to 100 million barrels, so the pipeline — which was far from complete when Biden fired a permit – would have contributed less than 1% to the world’s oil supply.
Asked if the cancellation of Keystone XL is the cause of the high gasoline prices, Tom Kloza, an analyst for the Oil Price Information Service, replied: “A matter of political discussion. Has nothing to do with the 2022 price spike.”
Biden has announced decisions to release more oil from a strategic reserve, but those releases have been too small to have any effect on prices at the pump.
EDITOR’S NOTE — A look at the veracity of politicians’ claims.