The Trillion-Dollar Infrastructure Bill Will Fuel Inflation

Policy makers are leaning forward with stimulus as favorable economic winds blow at their backs

By Stephen Miran. Mr. Miran served as a senior adviser for economic policy at the U.S. Treasury, 2020-21. Excerpts:

"A recent working paper published by the National Bureau of Economic Research reviewed the evidence of infrastructure investment’s short-term negative effects on the economy and found little sign of stimulus effects. Drag occurs in part because building new infrastructure disrupts the use of existing infrastructure, braking the economy’s supply side, not stimulating it. "

"During road construction, for instance, traffic increases substantially, falling only after the project is completed. More traffic increases the amount of time it takes for the economy to produce the same amount of goods and services, which pushes prices higher. With such a large infrastructure package, we can expect this phenomenon to be widespread."