EXCLUSIVE Rating Agencies Say Biden’s Spending Plans Won’t Add to Inflation Pressure

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US President Joe Biden delivers remarks on the status of his US bailout from the White House State Dining Room in Washington, DC, United States, May 5, 2021. REUTERS / Jonathan Ernst

Nov. 16 (Reuters) – US President Joe Biden’s infrastructure and social spending legislation will not increase inflationary pressures in the US economy, economists and analysts from major rating agencies told Reuters on Tuesday.

Biden has spent the past few months promoting the merits of the two laws – the $ 1.75 trillion “Build Back Better” plan and a separate $ 1,000 billion infrastructure plan. Read more

The two pieces of legislation “are not expected to have a real impact on inflation,” William Foster, vice president and head of credit (Sovereign Risk) at Moody’s Investors Service, told Reuters.

The impact of spending programs on the budget deficit will be rather small as they will be spread over a relatively long time horizon, Foster added.

Sen. Joe Manchin, a centrist Democrat, has previously raised inflationary concerns over Biden’s social spending plan, with a report earlier this month suggesting he could delay passage of Build Back Better legislation. Read more

“Bills do not add to inflationary pressures, as policies help stimulate long-term economic growth through higher productivity and labor growth, and thus reduce inflation,” said said Mark Zandi, chief economist at Moody’s Analytics, which operates independently of the parent company’s rating business.

Zandi said the costs of infrastructure legislation and social spending are sustainable.

“The bills are largely paid by higher taxes on multinational corporations and affluent households, and more than paid when you consider the benefit of added growth and the resulting impact on the government’s fiscal position,” he said in a statement. maintenance.

Charles Seville, senior director and co-head of Sovereign States of the Americas at Fitch Ratings, said the two pieces of legislation “will neither boost nor reduce inflation much in the near term.”

Public spending will still add less to demand in 2022 than in 2021 and in the longer term, social spending legislation could increase labor supply through provisions such as childcare and productivity, Seville told Reuters.

The House of Representatives passed the $ 1 trillion infrastructure package earlier this month after the Senate approved it in August. Biden signed the bill on Monday.

The Build Back Better package includes provisions for child care and preschool, senior care, health care, prescription drug pricing and immigration.

“The deficit will continue to narrow in FY2022 as pandemic relief spending declines and the economic recovery increases tax revenues,” Seville said. “But the legislation (Build Back Better) does not sustainably fund all initiatives, especially if they are prolonged and do not end, which means they will be financed by a larger loan.”

The Congressional Budget Office plans to release a full cost estimate for the Build Back Better plan by Friday, November 19. Biden said on Tuesday he expected the Build Back Better legislation to pass within a week.

Report by Kanishka Singh in Bangalore; edited by Dan Burns and Lincoln Feast.

Our Standards: Thomson Reuters Trust Principles.

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