High Inflation ‘Not All on Biden,’ as Trillions in Fed Stimulus Partly to Blame: Rattner

Wall Street financier Steven Rattner attends an event in New York City, on Nov. 18, 2009. (Neilson Barnard/Getty Images for Fortune Magazine)

A former Obama administration adviser said on Thursday that soaring inflation is in part due to continued public spending of large amounts of COVID-19 stimulus, stating that the Biden administration is not entirely to blame.

Steven 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,” where 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, while noting 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 Nov. 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 pandemic-related stimulus.

Congress ‘Saved the President From Himself’

“We poured roughly $2.5 trillion into Americans’ pockets during the pandemic, for lots of good reasons, including money they didn’t spend. 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,” said Rattner, who is chairman and CEO of the investment management firm Willett Advisors LLC.

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, before 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. 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 said.

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.