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Sen. Rob Portman: Infrastructure Bill Will Fight Inflation

The new infrastructure bill will give billions to Ohio for highways, bridges, electric vehicle chargers, public transportation and more. Unlike many other Republicans, Portman argues that this bill could help curb inflation.

(TNS) — As Republicans cite recent inflation as a sign that the nation is going in the wrong direction under President Joe Biden, U.S. Sen. Rob Portman argues that the $1.2 trillion infrastructure bill Biden signed at the White House on Monday will help curb that trend as it funnels billions of dollars to states like Ohio.

The newly minted law will channel $9.2 billion to Ohio highways, $1.4 billion to the state’s water infrastructure, $1.2 billion for Ohio public transportation, $1 billion for the Great Lakes Restoration Initiative, $483 billion to fix Ohio bridges, $140 million for Ohio’s electric vehicle chargers, $100 million to bolster Ohio broadband and $253 million for Ohio airports.

Portman, who spent months negotiating the deal with his Democratic counterparts, was the only Republican member of Congress to speak at the bill signing ceremony. All Ohio’s Democratic Congress members backed the bill and attended the ceremony. Rocky River’s Anthony Gonzalez was the only Ohio Republican in the House of Representatives who supported it, but he skipped the ceremony.

In a Senate floor speech on Monday, Portman argued the legislation will counter inflation over time. He said inflation happens when prices rise because there’s too much demand for goods and not enough supply. It occurred after the pandemic because more people were trying to buy things before the supply of goods returned. Portman argues that the $1.9 trillion spending bill that Congress approved in March worsened the problem because it went “right into people’s pockets,” increasing demand for goods when “the supply wasn’t there, which raises inflation.”

He said current inflation rates are “devastating” for lower and middle-income families in Ohio.

“Right now, our country is facing historically high levels of inflation, highest inflation we’ve had in more than 30 years, and it’s a big problem,” said Portman. “Everything’s gone up. Gas, I heard yesterday that now gas has gone up 50 percent this year. Two weeks ago, it was 42 percent. But all I know is that it’s gone up about a buck a gallon. And when I fill up my pickup truck, I’m spending $100 now. And that’s tough for people, particularly people who have to commute for their work.”

He said the infrastructure bill he supported will provide “long-term spending for capital assets,” which will reduce inflation “because you’re adding to the supply side.”

“By building that bridge, that’s part of the supply side of the economy rather than the demand side of the economy,” said Portman. “This is long–term spending for capital assets.... The infrastructure bill should over time actually have a counter inflationary effect. Most of the money, again, is not going to be spent in the near term. Most will be spent over time, but when it is spent, it’s spent more on the supply side of the economy rather than the demand side of the economy.”

He contends the upcoming “Build Back Better” social spending bill that Democrats hope to pass without GOP support in upcoming days will add to inflationary pressures by overheating the economy, much as the earlier bill did.

Portman says the October inflation rate, if it continues over the next year, would amount to an 11.4 percent yearly inflation rate. He said the nation hasn’t experienced that sort of double digit inflation since 1981.

Conservative economist Douglas Holtz-Eakin of the American Action Forum agrees with Portman that the infrastructure bill won’t “generate any significant near-term stimulus or inflationary pressure,” arguing that the $5.6 billion in spending it will generate each year “simply is not going to move the macroeconomic needle” in a roughly $21 trillion economy.

“While the BIF will not create additional inflation pressure, it will also not solve the administration’s current inflation-related political problems,” Holtz-Eakin wrote last week. “There just is not enough impact in the near term to accomplish this task. Even at the peak, this would require a more significant impact on productivity and aggregate supply, and these dollars are not large enough to accomplish this kind of supply expansion.”

A piece that Holtz-Eakin wrote with economist Michael Strain of the right-leaning think tank the American Enterprise Institute, said “a well-structured infrastructure bill would boost the supply side of the economy, reducing inflationary pressures. Improving roads, bridges, and ports would make it less costly for businesses to operate, allowing them to increase their output per hour, and putting downward pressure on consumer prices.”

“The goal of the proposed infrastructure plan is not to boost the demand side of the economy, giving it a quick, Keynesian jolt through ‘shovel-ready’ projects,” they wrote. “This type of infrastructure spending could be inflationary. Instead, the goal is to increase the productive capacity of the economy over the course of nearly one decade. Under the plan, (roughly) no money would be spent in 2021. The vast majority of the money would be spent after 2022. We expect inflationary pressures from President Biden’s February stimulus, reopening, and pandemic-related supply constraints to have abated by 2023. So spending under the infrastructure plan would overwhelmingly occur after current concerns about inflation have subsided.”

U.S. Sen Sherrod Brown, an Ohio Democrat, attributes much of inflation to supply chain disruptions. He argues that squeezing the supply chain “so these costs don’t spike like that,” and passing Biden’s “Build Back Better” legislation will help. He said he’d also like to see production that shifted to other countries return to the United States so the nation won’t have to rely on foreign countries for key goods.

National Economic Council Director Brian Deese on Sunday told CNN’s “State of the Union” that he believes the current round of inflation is temporary, because the pandemic and economy are interlinked. The coronavirus pandemic forced people to consume more goods at home, rather than going out and spending on services. He said global supply chain challenges associated with COVID also added to price increases.

“In the very immediate term, we’re working with ports around the country to get goods moving more quickly through the economy,” said Deese, calling that the infrastructure bill “the most significant step that we will have taken in decades to actually invest in the arteries that help move goods more quickly through our economy, more cheaply through our economy.”

He disputed the contention that the American Rescue Plan contributed to inflation, arguing that it saved the nation from “an acute economic emergency,” and said he that he does not believe the upcoming “Build Back Better” legislation that Democrats in Congress are considering will increase inflation, as Portman predicts.

“It’s not going to add to inflationary pressures, quite the opposite, because we’re going to pay for everything in this bill by raising taxes on big companies, large corporations and the highest-income Americans,” Deese told Jake Tapper. “So there’s an urgency to act. The House is going to consider this bill this week. And we’re looking forward to making progress and getting this done.”

Seventeen recipients of the Nobel prize in economics released an open letter this month that said the U.S. economy “appears set for a robust recovery” due to government interventions, and predicted Biden’s “Build Back Better” agenda will reduce long-term inflation

“While we all have different views on the particulars of various economic policies, we believe that key components of this broader agenda are critical—including tax reforms that make our tax system more equitable and that enable our system to raise the additional funds required to facilitate necessary public investments and achieve our collective goals,” their statement said. “Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy, it will ease longer-term inflationary pressures.”

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