Former Obama administration adviser Steve Rattner said on Thursday that the Biden administration is not entirely to blame for soaring inflation.
According to Rattner, continued public spending of large amounts of COVID-19 stimulus is partly to blame.
Rattner, who served as an adviser to the Secretary of the Treasury under the Obama administration made the comments during an interview on MSNBC’s “Morning Joe.”
He also said he expects interest rates to remain high “for the foreseeable future.”
“I think we’re going to have higher rates for the foreseeable future, but the economy itself is actually doing okay,” Rattner said.
He also noted that the Federal Reserve’s moves to raise interest rates by 75 basis points are “extremely large by Fed standards.”
The central bank initiated another 75 basis-point hike on November 2 to a target range of 3.75–4.00 percent, marking the sixth rate increase this year and the fourth consecutive 75-point increase in 2022.
Rattner said that inflation has skyrocketed over the past year and that the “Fed essentially did nothing for almost a year,” meaning the central bank is now having to “play catch-up” while inflation remains stubborn.
When asked why the soaring cost of living is not coming down, Rattner pointed to a number of reasons, including a large number of unfilled jobs in this marketplace, and excess savings in the economy, bolstered by the pandemic-related stimulus.
“We poured roughly $2.5 trillion into Americans’ pockets during the pandemic, for lots of good reasons, including money they didn’t spend,” said Rattner, who is chairman and CEO of the investment management firm Willett Advisors LLC.
“We’ve been gradually working that off. But it’s still well over $1.5 trillion, almost $2 trillion.
“And so consumers are still spending, even though their real incomes are going down.”
However, Rattner cited data showing that gross domestic product (GDP) increased at an annual rate of 2.6 percent in the third quarter of 2022, up from a decrease of 0.6 percent in the second quarter.
“There are good things to be said about the economy that somehow get lost in the whole inflation figure,” he said.
He continued by noting that “the Biden administration’s first rescue plan was probably too much” and came at a time when the U.S. economy was “already on the path to recovery from COVID.”
“But it wasn’t what created 8 percent inflation,” Rattner said.
“A lot of it was … the Fed put many more trillions into the economy than we did through the American Rescue Plan.
“And so, yeah, it’s not all on Biden.”
Rattner’s comments echo those of New Hampshire Gov. Chris Sununu, who warned last month that spending allocated under the American Rescue Plan and infrastructure package has not yet been spent, and could further exacerbate inflation over the next few years as it is released into the economy.
Elsewhere, Rattner said he believes that Congress had ultimately “saved the president from himself” by failing to pass the Build Back Better plan, which likely would have added to inflationary pressures.