Wednesday’s alarming inflation numbers are spooking some Utah lawmakers as they prepare for next week’s special session to accept more than $1.5 billion in federal coronavirus stimulus money.
Consumer prices surged in April to a level not seen since the Great Recession in 2008. The Labor Department says the consumer price index jumped 4.2% from a year ago, which’s up from 2.6% in March.
The Utah Legislature will meet in a special session next week to accept money from the American Rescue Plan Act, the $1.9 trillion stimulus bill passed by Congress in March. Most of that money will go toward infrastructure projects.
Their biggest fear for legislators is pumping more money into the economy as the recovery from the coronavirus pandemic appears to be heating up. Utah already has one of the best economies in the country. The state was one of two to emerge from the pandemic with a net job gain.
“This is something we’re very concerned about,” said Rep. Robert Spendlove, R-Sandy. “The fear is we need to be careful about not overheating an already strong economy, especially with an injection of billions of dollars.”
Spendlove, an economist for Zions Bank, says some inflation is good, but too much can be a significant problem.
“It’s better to have prices going up. For the last 20 years, we’ve had very low inflation, around 2%. What you don’t want is hyperinflation of 5% or more. That creates asset bubbles, which is what drove the last recession,” he explained.
Utah is already throttling back on the federal money coming into the state. On Wednesday, Gov. Spencer Cox announced the state would no longer take part in the enhanced unemployment benefits offered by the feds for workers who lost their jobs during the pandemic. That’s due to Utah’s low 2.9% unemployment rate, which is just above the 2.7% rate the state enjoyed last year right before the pandemic.
The bottom line is not to expect lawmakers to spend much, if any, of that federal cash next week since they have until 2024 to decide where it goes.
That federal windfall is both good news and bad for the state. It led to a projected budget surplus of over $1 billion that lawmakers used to make historic investments in infrastructure and education funding. But, it’s also contributing to the dramatic rise in prices we see right now.
“We’ve managed our way through this pandemic in such a way that we do have these record surpluses,” said Cox during an interview with PBS Newshour on Tuesday. “I do think we are spending too much federal money. We’ve never seen this type of spending before.”
Lawmakers are currently gathering ideas of which infrastructure projects should be funded, with an eye toward not creating inflationary pressures.
For example, Utah is currently experiencing shortages in construction materials, including concrete and lumber. If lawmakers decided to put a significant amount of money into expanding I-15 or other road construction, they would likely monopolize the already scarce supply of concrete or that could start a bidding war that would drive prices up. Lawmakers are keen to avoid that scenario.
“It’s really important for us to make sure we’re using this money in the most responsible way possible,” says Spendlove.