The "cards are aligned" for a bipartisan infrastructure bill with a price tag of about $1 trillion after Senate Republicans made their $928 billion counteroffer to President Joe Biden's infrastructure plan, which currently stands at $1.7 trillion, former White House Council of Economic Advisers Chairman Kevin Hassett said Friday.
"I think that Republicans are negotiating, but they're actually close to the finish line," Hassett, who served under former President Donald Trump, said on CNN's "New Day." "I think both sides want to accomplish an infrastructure bill before the summer break. And I think that Democrats are trying to get Republicans to play along so that they can keep their reconciliation courage, that trick where you can get something through without exposing it to the filibuster for when they come back in the fall."
Part of the Republican plan calls for funding through unused COVID relief funds, and Hassett said he thinks that will be one of the details that will be argued until the two slides split the difference.
"In the end, this bill is probably not going to be paid for, really, and they'll have enough votes to get it through anyway," said Hassett. "There will be some tipping of the cap in the direction of fiscal responsibility, but we're so deep in the hole."
Government spending relative to the GDP this year will likely be about what it was in 1943, and the deficit "is probably going to be humongous, maybe 20% of the GDP by the time they're done," he added. "The trillion-dollar stimulus bill is relatively small compared to everything else that's happened and the challenge ahead is to sort of restore ourselves to a sustainable path and that's going to take a lot of bipartisan, cooperative thinking."
Hassett said he agrees there is a "lot of room for infrastructure spending," considering the shape much of the nation is in, but he agrees with Republicans that the money needs to go for traditional projects and not so-called human infrastructure like childcare programs.
"Inflation is really taking off," he said. "If you look at the last couple of months, it was about 7% two months ago and now it's probably about 10% at an annual rate ... we've given people lots of cash and so demand is soaring but supply hasn't kept up, and supply hasn't kept up because workers, a lot of them are staying on the sidelines."
Hassett also said the first half of the year, the economy will be growing at a fast rate, but for the second half of the year, there are questions because of inflation.
"The turning point that I'm looking to is in the fall," said Hassett. "Presiden Biden has an objective of constraining supply even more with corporate tax hikes and other tax hikes. And if you push supply down, while pushing demand up, it's a recipe for inflation like we haven't seen maybe ever. "
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