Can a nation spend its way to prosperity? That seems to be the theory Democrats and the Biden administration are testing, as they push a $2 trillion infrastructure bill on the heels of a nearly $2 trillion COVID relief bill. And that is all on top of the multiple trillion-dollar COVID relief bills passed during the past year under the Trump administration.
The residual effect of all of these spending bills is starting to get staggering. "Last year we had a three-trillion dollar deficit, this year we're going to have another three-trillion dollar deficit, and with the infrastructure program it will be even bigger than that," says Peter Morici, University of Maryland economist and columnist.
In a recent column, Morici warns that all of this massive deficit spending is bound to lead to one of two things: inflation or higher interest rates. "Either way, high interest rates keep people from buying houses, and high inflation makes life miserable especially for the poor and working class folks Mr. Biden wants to help," he tells KTRH.
All of this could ultimately could mean trouble for Biden's party in the 2022 midterm elections, as they seek to win those narrow swing districts that flipped from Donald Trump last year. "By next year, people will forget those stimulus checks, but the price of gasoline will be hitting them right between the eyes," says Morici.
Indeed, the price of gas rose by more than 9% last month alone, while the cost of lumber is up nearly 200% since last year. Morici believes those trends continuing over the next two years could spell doom for Democrats at the ballot box. "You just can't keep spending money any old way to make people happy and buy some votes, without having adverse consequences in the economy," he says.