Biden, as usual, calls on Zandi as economics analyst; Penn Wharton Budget Model study sees little gain from Infrastructure Plan

Mark Zandi (Wikipedia)

Tom Paine

Mark Zandi, founder of West Chester-based Moody’s Analytics (originally , a Wharton Grad and Penn Economics Ph.d, has long been a backstop for Democrats on economic policy. I’m sure there are more nuances to his stances in private, but publicly he’s President Biden’s go-to guy for comments backing up administrative policy. On Wednesday night’s CNN Town Hall, Biden commented referring to Zandi:

“No, look, here’s the deal, Moody’s today … a Wall Street firm, not some liberal think tank, said, if we pass the other two things I’m trying to get done, we will, in fact, reduce inflation, reduce inflation, reduce inflation,” Biden said, “because we’re going to be providing good opportunities and jobs for people who, in fact, are going to be reinvesting that money back in all the things we’re talking about, driving down prices, not raising prices.”

Zandi’s report, released Wedesday, states:

“The nation has long underinvested in both physical and human infrastructure and has been slow to respond to the threat posed by climate change, with mounting economic consequences. The bipartisan infrastructure deal and reconciliation package help address this.”

“Worries that the plan will ignite undesirably high inflation and an overheating economy are overdone. The fiscal support it provides is only sufficient to push the economy back to full employment from the recession caused by the COVID-19 pandemic,” Zandi wrote.

Most economists I read (even Democrat regular Larry Summers) are skeptical about the latter argument, that pouring trillions more of borrowed money into an already gorged ecnonomy will help to reduce inflamed inflationary pressures.

While Zandi did say in the report that Biden’s investment plan would “lift productivity and labor force growth”, I haven’t seen where he precisely says that it will reduce inflation, though he expects inflation to stabilize in the near term anyway.

Update 8/9:

In a study released at the end of June authored by Jon Huntley, senior economist, The Penn Wharton Budget Model took a longer view and predicted an almost net zero macro impact on the economy from the Infrastructure bill looking out to 2040 and 2050.

“The headline numbers look small—0.1 percent of GDP does not appear to be a large number—however, these benefits continue to accumulate year after year for as long as the infrastructure is in use,” Huntley says.