Tipsheet

Fact Check: Did 'Nobody' Predict Inflation as Psaki Claims?

Katie Pavlich
Katie Pavlich  |  May 10, 2022 10:00 AM

During the daily briefing at the White House Monday afternoon, Press Secretary Jen Psaki claimed "nobody" could have predicted current, record inflation. 

"As we look ahead to tomorrow's inflation speech, let me ask you to look back at some of the warnings that were issued last year by Summers and Rattner and so on. In retrospect, were they right that some of the government policies were going to lead to inflation?" a reporter asked. 

"I wouldn't say we agreed with them then, and we don't agree with them now. I would note that as a relates to actions like the American Rescue Plan, the alternative to not putting in place and advocating for the American Rescue Plan would have been the economy continuing to spiral. Right?  We would -- we were providing assistance and relief in the form of checks to people who needed that assistance at the time," Psaki responded. 

"If we look at the recent inflation data, a large, depending on which data you look at, two thirds to even 70 percent of inflation data is a result of energy prices," she continued, arguing Biden Administration policies and government policies aren't the driver behind inflation. "A large part of that is the result, Chairman Powell has spoken to this and Secretary, Secretary Yellen has also spoken to this, is a result of President Putin's invasion of Ukraine and the impact on the global energy markets. Those are all steps and impacts that I don't think anyone could have predicted a year ago."

But those steps were in fact predicted a year ago while Biden administration officials claimed inflation was "transitory." 

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In February 2021, Obama economic advisor Larry Summers warned about coming inflation as a result of President Biden's $1.9 trillion American Rescue Act. Biden officials argued the package, which no Republicans voted for, would stimulate the economy and that it was necessary to rescue those impacted negatively by government decisions during the pandemic.

"As a massive program moves toward enactment and implementation, policymakers need to ensure that they have plans in place to address two possible, and quite serious, problems," Summers wrote in The Washington Post. "While there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability. This will be manageable if monetary and fiscal policy can be rapidly adjusted to address the problem. But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply."

During an interview with CNN Tuesday morning, Biden's top economic advisor Cecilia Rouse made the argument that inflation is a result of Biden "effectively" managing the pandemic.