Biden spending plans hit speed bumps

President Biden’s latest spending proposals are hitting a series of speed bumps.

Biden has proposed more than $4 billion in new spending on infrastructure and social spending measures, but several recent developments could make getting the measures through Congress more difficult.

A disappointing monthly jobs report has Republicans arguing that some of Biden's proposals included in the $1.9 trillion COVID-19 relief bill are actually slowing the recovery by disincentivizing workers to get jobs.

Economists are split over the issue, but it has served as an opening for Republicans to get a toe hold in the unfolding battle for public opinion on Biden’s plans.

“It's not great,” one Democratic strategist acknowledged of the April jobs report. “And it will certainly slow down the process and any momentum Biden had in recent weeks without a doubt because Republicans will use this to show that some of these ideas being pushed aren't sound.”

Democrats, for their part, are divided over the substance of Biden’s proposals and how best to advance them.

Some want to work on a smaller infrastructure proposal with Republicans and notch a bipartisan win ahead of the 2022 midterms, believing it will help the party retain its congressional majorities.

Progressives say the party must go big and worry the bipartisan talks could slow progress and upend Biden’s plans.

“Let’s not pretend that Republicans are interested in any sort of compromise. Let’s go big, go bold, and make the ultra-rich and corporations finally pay their fair share so we can invest in working families,” Rep. Pramila Jayapal (D-Wash.) tweeted Wednesday following a meeting between Biden and bipartisan congressional leadership on his infrastructure plan.

A third bump came Wednesday with an unexpectedly large increase in inflation in April. Consumer prices rose at the fastest rate in more than a decade, according to data released by the Labor Department. The consumer price index rose 0.8 percent in April and 4.2 percent in the year leading into last month.

Months before the report, Larry Summers, a former economics adviser to former President Obama and a Treasury secretary during the Clinton administration commenting as Biden pushed a $1.9 trillion COVID relief measure that ultimately became law, had warned that spending by the government could lead to a rise in inflation.

White House press secretary Jen Psaki downplayed Wednesday’s inflation report to reporters hours after its release, describing it as a “transitory increase” that would prove temporary. 

“We knew just as the economy sort of shrunk and shut down that as it’s turning back on there would be some of these impacts,” Psaki told reporters.  “As we experience this massive transition, we continue to chart our path to recovery and we know that a number of the investments that we have proposed were long needed even before the last several months.”

Nonetheless, the new unhelpful economic data coupled with the longstanding differences among Democratic lawmakers come at an inopportune time for the Biden administration, which is aiming for congressional action on some of its proposals as soon as this summer.

Biden’s plans were already coming under criticism from Republicans and business groups, who have hammered his plan to raise taxes on the rich and corporations to pay for his social spending measures.

The U.S. Chamber of Commerce called for an end to the $300 weekly boost to unemployment benefits, which is slated to expire in September. Several Republican governors have gone even further, announcing they would pull their states out of both the federal supplement and other federal programs that expanded and extended jobless aid during the pandemic.

Biden administration officials have insisted that the data does not show that the unemployment benefits contributed to the slowdown in growth, blaming it primarily on health concerns related to the pandemic and a lack of fully open schools and childcare options.

Still, Biden seemed cognizant of the optics when he reaffirmed Monday that people who turn down a “suitable” job cannot continue to receive the added benefits unless they meet a narrow set of exceptions for the pandemic.

“No one should be allowed to game the system and we’ll insist the law is followed but let’s not take our eye off the ball,” Biden said. 

Liberal economists who were skeptical of the labor shortage narrative have also ceded that some restaurants and hospitality businesses will not be able to keep up with current wage demands.

“Labor shortages—which we would define by a large acceleration of wage growth to a rate that would be hard to sustain over the next year—do seem to have popped up in the leisure and hospitality sector,” wrote Josh Bivens and Heidi Shierholz of the Economic Policy Institute, a left-leaning think tank.

Some Democrats argue that the reaction to last week’s jobs report, which showed the U.S. gaining 266,000 jobs in April after economists predicted it would add closer to one million, has been overblown. 

The White House has emphasized that the U.S. saw notable gains in the leisure and hospitality sector while urging patience on the long road to economic recovery.

“Overreacting to one jobs report in either direction in the middle of a historic time of economic turmoil is probably a bad idea,” Democratic strategist Joel Payne said. “Obviously Republicans will attempt to use this as an excuse to blunt some of Biden's proposals in the infrastructure package.” 

“The Democrats I talk to still have a good deal of faith in the president and his team to control the conversation around the economic recovery,” Payne added. “One bad Friday news cycle is not unprecedented nor irreversible.”

Democrats regularly point to the popularity of Biden’s proposals, which are meant to be long term investments made over eight- and 10-year periods. A Morning Consult poll released last week found that 60 percent of voters support Biden’s $1.8 trillion families plan and various surveys have shown public support for his infrastructure and climate proposal above 50 percent. 

The White House is banking on the next jobs report showing more substantial growth, given the quickened pace of coronavirus vaccinations and return to more normal life, which would boost momentum as Biden seeks action on his legislative items. 

“Republicans have a bit of a talking point for the next few weeks, but I bet that next jobs report is going to look really strong,” said Jim Kessler, executive vice president for policy at Democratic think tank Third Way. “The Biden plans are really about the long term, and they’re going to have to keep the focus that way.”