Will a large infrastructure plan create inflation? If inflation is linked to higher wages, that's not bad for workers, says Pollin. Large increases in inflation have been linked to higher oil prices which are unlikely. What's missing from the Biden plan is it doesn't sufficiently address a just transition for fossil fuel workers. Bob Pollin joins theAnalysis.news with Paul Jay.

Transcript

Paul Jay

Hi, I'm Paul Jay, welcome to theAnalysis.news. Please don't forget the donate button, the subscribe button, and all the buttons and we'll be back in a second with Bob Pollin.

The Biden administration is trying to pass its $2.2 trillion infrastructure plan, although it's been reported Biden is willing to cut that plan by 25 percent to make a deal with Republicans who warned of a new round of inflation. Some liberal economists, notably former Clinton and Obama adviser Larry Summers are also raising the alarm that trillions of dollars of government spending will be inflationary. The inflationary cautions are also being raised by well-known economic columnist Martin Wolf, writing in the Financial Times in March, "The likelihood, then, is that there's going to be a huge expansion in spending and little in the way of additional taxation. Given the monetary expansions, too, the chances of an inflationary overshoot have substantially increased. If this happens in the U.S., worldwide spillovers are quite likely, not least in the UK. But in other high-income countries, too, household savings are high, fiscal deficits large, and monetary policy expansionary. The kindling needed to light an inflationary fire can be seen almost everywhere." Further down, Wolf writes, "Above all, an inflationary overshoot will trigger a disinflationary response from central banks. That will mean much higher policy rates. That could lead to waves of default, far more pervasive than in the early 1980s when the big story was the debt crisis in developing countries. This time, the debt crisis could be almost everywhere, because there's so much more debt." Wolf concludes with, "Inflation has not come back. It may never do so. But the political and policy shifts we are seeing today after Covid, together with longer-term changes in the world economy, have raised the chances of an inflationary shock of some kind. Investors must take this possibility into account."

Now joining us to discuss whether the inflation fears are justified, as Bob Pollin, he's co-founder of Perry the Political Economy Research Institute in Amherst, Massachusetts, and author of the book he co-authored with Noam Chomsky titled Climate Crisis and the Global Green New Deal: The Political Economy Saving the Planet. Thanks very much for joining us again, Bob.

Bob Pollin

Thanks very much for having me on, Paul.

Paul Jay

So before we get into what Wolf and some other people are saying. I've done a couple of stories on this issue of is inflation really coming back and so on and some people are writing in saying maybe the overall inflation rate hasn't gone up, but when I look at my cost of living, it's gone up. So, talk a bit about the relationship of the cost that ordinary people feel and this overall still relatively low level of inflation.

Bob Pollin

Well, the thing that's clearly gone up dramatically are oil prices and people experience that day to day and of course, the price of oil, petroleum is, you drive in the street and you see it posted. Four months ago, roughly speaking, it was $2 a gallon and now it's roughly $3 or more depending on your community. So that's definitely gone up and that's what people are seeing and I think they're incorporating that,