Forget about Donald Trump and Elon Musk for a second, and let’s talk Joe Biden, the erstwhile focus of economic policy discussion. We know elevated inflation was an important contributor to his electoral loss in November. But were his economic policies, themselves, to blame for that inflation? Jason Furman, the former top economist for President Barack Obama who now teaches at Harvard University, says the answer is yes. In a Q&A with Victoria following his recent 5,000-word piece in Foreign Affairs, Furman had some stinging critiques of Bidenomics, arguing that the former administration went way too big on fiscal stimulus in March of 2021. In fact, he said, production and shipping delays were much more about elevated spending than a breakdown of global supply chains. “On the durable goods side, with the important exception of cars, we had a massive, massive supply chain success,” he argued. “There were a few months where people cut their spending in the wake of Covid, but then they raised it above normal. And in 2021, they raised it way above normal, and some combination of increased production and increased imports meant that most people got most everything that they needed and wanted. And got it roughly when they wanted.” He also said the government’s approach to funding infrastructure projects was “basically a failure” — namely, that it pumped money out while imposing additional regulatory barriers and without pursuing permitting reform. “Furman’s argument stands out at a moment when Democratic officials and thinkers have largely muted tough conversations about the party’s identity and future,” Victoria writes. “Since the election, there has been limited appetite among Democrats for critical self-assessment.” High-ranking Biden administration officials are already weighing in on Furman’s recent piece. Former White House economist Ernie Tedeschi and former Treasury economist Eric Van Nostrand pushed back on Furman’s claim that — in inflation-adjusted terms – infrastructure spending went down, saying it depends on what measure you use. But they acknowledge that higher costs dampened the impact of that spending. Biden’s chief economist, Jared Bernstein, also took on a number of Furman’s claims: “Let me start by agreeing with a core part of Jason’s argument. He’s right that the American Rescue Plan contributed to inflation,” Bernstein wrote in a Substack post. “Where Jason loses me, and, I suspect, others who’ve dug into this, is his downplaying of the impact of the pandemic-induced supply shock on inflation. The ’21-’22 spike in inflation was born of strong demand colliding with damaged supply. You need both to explain what happened.” Furman wants the debate. “I think ideas will be better if all the different participants in the ideas share what they’re thinking, rather than certain ideas get systematically suppressed,” he told Victoria. “Even if I’m wrong, I think the principle that everyone says what they think and then we sort it out is going to, in general, result in better answers.” Read the full Q&A here. IT’S THURSDAY — Have tips, thoughts or suggestions? Email Sam at ssutton@politico.com. And always feel free to send any economic or financial policy thoughts to Victoria at vguida@politico.com.
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