National Economic Council Director Brian Deese said on Wednesday that the United States can address high inflation by passing more spending bills.
The Consumer Price Index (CPI) rose 9.1% between June 2021 and June 2022, according to a report from the U.S. Bureau of Labor Statistics. During an interview with CNBC host Carl Quintanilla, Deese urged Congress to address the supply-side issues contributing to higher inflation by passing semiconductor manufacturing incentives.
However, Quintanilla pressed Deese on the notion that higher spending would resolve the highest inflation in over 40 years, which comes on the heels of $6 trillion in federal stimulus packages enacted in response to COVID. “That brings us right back to the circular argument, Brian, that more spending is not what you typically do in the face of high inflation. How do we break out of that circle?” Quintanilla asked.
“I think you have to look at the unique situation that we’re in as an economy and think about how do we build more supply, how do we increase the productive capacity of our economy, so that we actually can supply more goods, bring prices down.” replied Deese, who formerly worked as a senior adviser to President Barack Obama. “We know the answer on semiconductors exactly. We need more supply of those goods.”
Lawmakers have indeed proposed the $52 billion CHIPS for America Act — yet Intel, TSMC, and GlobalFoundries issued “public warnings” that they might “scale back their plans to make semiconductors” in the United States since the funding has not yet been greenlit. “The rest of the world is moving rapidly despite the inability of Congress to get this finished,” Intel CEO Pat Gelsinger said at a recent panel event, noting that Asian and European countries are passing new incentives for manufacturers.
“If there’s one thing to take away from this report, it’s that there is more urgency now than ever in Congress moving to pass a bill to try to build more domestic semiconductors, to try to bring down the price of those goods,” Deese told Quintanilla, pointing to rising prices for used cars.
President Joe Biden acknowledged on Wednesday that the new inflation reading is “unacceptably high,” but said that the data are “also out-of-date” since energy prices have eased in recent days.
“Energy alone comprised nearly half of the monthly increase in inflation. Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices,” he argued in a statement, noting that gas prices have fallen by $0.40 since June. “Those savings are providing important breathing room for American families.”
Gas prices fell to $4.63 per gallon as of Wednesday, according to AAA. Yet national average gas prices in early June surpassed $5.00 per gallon, even as prices were $2.38 per gallon ahead of Biden’s inauguration and $3.53 ahead of the Russian invasion of Ukraine, according to the U.S. Energy Information Administration.
Beyond the semiconductor legislation, Biden promised to “urge Congress to act, this month, on legislation to reduce the cost of everyday expenses that are hitting American families,” such as prescription drugs, utility bills, and health insurance premiums. Some Democratic lawmakers have supported legislation that would allow Biden to control prices by declaring an “energy emergency” to stop fuel companies from selling at prices deemed “unconscionably excessive.”