Republican Louisiana Sen. John Kennedy pressed Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Janet Yellen on the continuing rise of inflation on the Senate floor Tuesday.
“Is the Fed considering increasing the pace of its tapering? We’ve got to get control of inflation, it’s ravaging our people,” Kennedy told Powell.
“I think what we missed about inflation was we didn’t predict the supply side problems and those are highly unusual and very difficult. Very nonlinear and it’s very hard to predict those things,” Powell replied. “But that’s really what we missed and that’s why all of the professional forecasters had much lower inflation projections.”
Powell said the Fed will discuss at a December meeting whether it is “appropriate” to finish their taper purchases and accelerate their tapering a few months earlier than scheduled, due to inflated pressures and the supply chain issues. (RELATED: Fed Inflation Experts Are About As Credible As ‘Late-Night Psychic Hotlines,’ GOP Senator Says)
Inflation has hit its highest levels in three decades, with the Consumer Price Index (CPI) hitting 6.2% on a year-over-year measure. The prices of gas, food, and other products have suffered from a shortage, causing companies to raise their prices as their quarterly profits continue to plummet.
Kennedy said the recently passed infrastructure bill and President Joe Biden’s Build Back Better plan will cause the “American people to incur substantial debt,” prompting him to ask Yellen about the Biden administration’s limit on raising the national debt.
“First of all, I want to say I disagree with your assessment of Build Back Better. It is fully paid for or even more than fully paid for, and CBO just completed a comprehensive review of it, which they found essentially the same thing,” Yellen replied. “We’re very accustomed to looking at debt-to-GDP ratios.”
“And using those kinds of metrics and looking around the world, many economists have found that debt-to-GDP ratios of 100 or more tend to be associated with significant problems,” she continued.
Kennedy replied that he disagrees with the idea that Build Back Better is fully paid for. The Penn Wharton Budget Model estimates that the legislation will increase government spending by $2.1 trillion and raise the deficit by $274 billion.
Meanwhile, the Congressional Budget Office (CBO) recently estimated the U.S. deficit will surge to $327 billion due to Build Back Better. The most expensive Build Back Better provision, if passed, will fund $273 billion toward universal daycare and childcare, as well as spending an extra $268 billion towards a childcare tax credit and an expansion of Obamacare.
The president, House Speaker Nancy Pelosi, and White House Chief of Staff Ron Klain all promised that a minimum 15% corporate tax rate and funding for the IRS to cover missed taxes and a new surtax on millionaires and billionaires would prevent Build Back Better from raising the debt.