The Spectator joins the inflation doom-mongers

A lively and very reasonable debate is currently taking place over whether the US’s $1.9tn fiscal package is so big that it’ll trigger spiralling inflation. Less reasonable, however, is the spin given on said debate in this clip from the UK’s conservative-leaning weekly The Spectator, featuring Andrew Neil, the magazine’s chair, and Kate Andrews, its economics correspondent.

The video follows Wednesday’s “spend now, tax later” Budget, in which the chancellor Rishi Sunak announced that, while government spending spending will remain high for now, higher taxes will follow in the coming years. Neil and Andrews claim that what Swishy Rishi was doing with this Budget was “trying to protect from what Joe Biden might do to the UK economy”. Hmm . . .

The full version of The Spectator’s budget coverage, from which the clip is taken, is here:

The video contains some quite dubious claims. Here’s one from Neil:

If you look at some of the supply side constraints already visible in America — labour in some constraint too, housing, things you need to build a house and all the rest of it — people are having trouble sourcing quite a lot. Supply chains are already coming under pressure.

According to Jay Powell, Fed chair, there are 10m fewer jobs now than before the pandemic. Hardly sounds like a labour shortage to us. And while supply chain bottlenecks are a very real thing right now, they will begin to ease as the US economy reopens. The bottlenecks reflect that many activities are either temporarily shuttered or unable to operate at full capacity, not that demand in an economy that is operating as normal is so strong that the economy risks overheating and inflation surging.

Here’s another, from Edwards:

Globalisation’s taken a real hit, we just don’t know how quickly it’s going to come back, if it’s going to limp or it’s going to roar.

Here’s what’s happened to trade in goods since the pandemic hit:

Globalisation has, of course, been a massive force for lower prices in recent decades. And many (though, we admit, not all) of the upward price pressures that we have seen emerge in global supply chains are pandemic-related.

There’s a case for having a sensible discussion over whether or not inflation will rise in the coming years. But stoking panic in a bid to revive an austerity doctrine that economists widely view to be far more harmful than helpful right now? Not so much, if you ask us.