“This concern cannot be dismissed, but it is likely misplaced,” Zandi wrote.
Rather than inflame inflation, the analysts point out that new spending on items such as rental housing for low-income Americans, reducing prescription drug costs and making childcare more affordable is aimed at cooling prices off and easing shortages.
“Much of the additional fiscal support being considered is designed to lift the economy’s long-term growth potential and ease inflation pressures,” Zandi wrote.
Crucially, Moody’s Analytics notes that the Biden plan does not call for enormous deficit spending that could boost inflation.
“The legislation is more-or-less paid for on a dynamic basis through higher taxes on multinational corporations and the well-to-do and a range of other pay-fors,” Zandi wrote.
Moody’s Analytics said the proposals, if passed by Congress, will “strengthen long-term economic growth,” with most of the benefits going to lower and middle-income Americans.