This week President Joe Biden signed a bipartisan $1 trillion infrastructure bill into law. The Build Back Better Act is a victory for Democrats as billions gets spent on roads, ports, and power lines.
The original goal of the infrastructure bill was to overhaul transportation and energy systems in the U.S. That didn’t come to fruition, but now that the infrastructure bill has been inked – questions loom about inflation.
Will the $1.2 trillion infrastructure bill cause inflation?
Inflation has been the buzzword of the year. Especially among fiscal conservatives who say Democrats are going too far with spending taxpayer dollars. Whether it be stimulus payments, enhancements to tax credits, or the newly-signed infrastructure bill – all are viewed as negatives to the overall economy, according to Republican lawmakers.
Will Biden’s infrastructure bill cause inflation, though?
Economists say not at all. Mainly because of the timing.
Money from the infrastructure bill will not hit the economy immediately. Instead, there will be a slow flow of funds into the economy over the next 12 to 18 months.
“The timing is really important — that money will only start flowing into the economy maybe in the end of next year and in 2023 and on,” explained William Foster. He’s the vice president and senior credit officer at Moody’s Investors Service and recently spoke with CBS News about the fuss being raised among Republicans over the spending. “We think inflation will moderate by the middle of next year. By then, the supply-chain issues will work themselves out.”
The $1.2 trillion spend doesn’t happen all at once. In fact, it will take upwards of 5 years for all of the money to be distributed.
What impact could Biden’s infrastructure bill have on inflation?
Inflation rose more than 6% in October. It was the highest rate increase in more than three decades, according to the U.S. Bureau of Labor Statistics. Consumer prices have also been rising sharply – increasing almost a full percentage point in October.
“Prices increased at a faster rate in October due to ongoing supply chain problems and increasing demand,” Dawit Kebede, Credit Union National Association (CUNA) senior economist, said. “Used car prices that had been declining for the last two months increased in October as computer chip shortages, labor, and transportation issues worsened, limiting supply of new vehicles.
Does this mean Biden’s infrastructure bill will make it worse?
Opponents say that the infrastructure bill doesn’t do anything to quell rising energy costs, which is causing the surge in inflation. In fact, some opponents of the bill said this would cause energy rates to keep climbing – thereby creating greater inflation in the coming months.