Economist Michael Wilson with Morgan Stanley has led a group of the firm’s analysts in reporting that the massive and excessive fiscal stimulus spending by the Biden administration is a direct cause of the skyrocketing inflation that is hammering working Americans.
The report released on Monday said that “the slack” created by the COVID-19 related recession is “being absorbed much faster than usual.” It said that some of the issues have come from supply chain disruptions aggravated by lockdowns, but the larger cause is “excessive fiscal stimulus” allocated and spent in response to the pandemic.
It said that the $1.9 trillion allocation approved in March 2021 just after Biden assumed office was a particular cause, especially as it came just as the U.S. economy was emerging from lockdown mode.
That infusion of cash “turbocharged consumption,” driving the economy to see 40-year highs of inflation. The report says that the surge in consumer demand was too much for supply chains to handle. The already existing supply chain damage added to the shortage of consumer goods and rising prices.
The report also predicted that the stock markets would continue to lose value in the foreseeable future as concerns over inflation are smashing investors’ expectations about corporate valuations in light of suffering earnings.
Republican pollster Kristen Soltis Anderson observed that the report is consistent with concerns voters expressed in March 2021 as the massive Biden spending package was about to hit the economy. She said in a tweet that polling indicated voters were more concerned about the inflationary impact of the massive stimulus than politicians were.
In more recent polling, voters have become more pointed in blaming the fiscal policy of the Biden administration for inflation more than the COVID-19 pandemic, corporate greed, or the Russian invasion of Ukraine. So far, about all Biden has done in response is to claim that combating inflation is his “first priority.”
The Consumer Price Index rose last month at an annual rate of 8.3%. That continues the trend this year of the highest inflation in over four decades. The national average price for a gallon of gas hit another all time record high on Thursday at $4.59. Analysts at JPMorgan are predicting a national average by August of $6.20 per gallon.