Republicans Test Inflation as a Stick to Beat Biden Stimulus

Republicans are invoking the threat of inflation to attack President Joe Biden’s spending plans, after he won approval for $1.9 trillion in virus relief ahead of a broader recovery package that may cost even more.

The strategy likely faces an uphill task to gain voter traction. Inflation has been subdued for decades, most economists expect it to stay that way, and there’s little sign of public concern -- even if gasoline prices have been rising.

The prospect of a bout of inflation, as the economy roars back from its pandemic slump with the help of trillions of dollars in government spending, has gripped financial markets this year and pushed Treasury yields up. Still, investors and consumers expect prices to remain under control. The annual inflation rate was 1.7% last month. Economists forecast it will creep up to 2.9% in early summer, before falling back later in the year.

Congressional Republicans have seized on a warning from Harvard economist Larry Summers, a top economic official in both the Clinton and Obama administrations, that the consensus is too complacent. Summers has said the scale of Biden’s relief plan could set off inflationary pressures “of a kind we have not seen in a generation.”