Sen. Tim Scott, R-S.C., warned that the Biden administration’s massive government spending is driving up inflation and causing prices of everyday items like food and gas to soar, saying extended unemployment benefits have stymied the labor market, making it harder to convince Americans to get back to work.
"The Biden’s administration’s approach to throwing tons and tons and tons into the marketplace has led to inflation. And inflation is a tax on every American family," Scott told FOX Business Tuesday.
"Therefore, every American family is paying higher gas prices, milk is up, eggs are up. Your staples are up. That means the good that you think you’re doing by putting more cash into the economy is actually resulting in more inflation," he said. "We’re slowing our own economic recovery because small businesses have said without question that they can’t find people to go back to work."
According to the National Federation of Independent Business, 36% of small business owners are raising prices to fight inflation. And those owners have more jobs open than they can find the labor to fill.
"Which means their economic activity is slowing down at the same time they’re raising prices. That’s a double whammy for future job growth in our country," Scott said.
The American Rescue Plan, which passed in March, pumped up unemployment benefits with $300 per week in federal funding, a move Republicans have said is discouraging those receiving benefits from taking jobs where they might make less. It also offered $1,400 checks to millions of Americans.
And while April’s lackluster Labor Department stats showed just 266,000 new jobs added to the economy, falling sharply below the 1 million projected, the Biden administration has maintained that more people will enter the labor marker once vaccinated and better child care options are available.
The Labor Department reports that U.S. consumer prices for goods and services surged 0.8% in April, the largest monthly increase in more than a decade and the fastest year-over-year jump since 2008.
Scott said "connecting the dots should be easy," for his Democratic colleagues, "but sometimes when you’re lost in a philosophical discussion, you forget practical reality."
"That’s part of the challenge in Washington, Washington is like a bubble, and people within that bubble don’t necessarily understand and appreciate what’s happening outside that bubble – one of the most important things is to spend as much time in your home state as possible and talking to your folks to remember why you are doing what you hope that it is to be accomplishing."
"Everyday folks – I consider myself one of them – who are putting gas in their car, you’re looking at the gas price and it’s 70 or 80% higher than what it was at the beginning of the year," Scott said. "You go to the store and try to find your normal groceries and you’re stunned at it. And, frankly, if you’re in the housing market, the lumber prices are up because of the transportation costs."
Scott said he expects to see a third and fourth quarter recovery that he attributed to "pent up demand," but that will last for only a short period of time, and "what will lag behind that recovery will be long-term effects of this cash infusion into the economy" and inflationary effects of extending benefits.
According to the recent analysis released by the Republican National Committee, the average unemployment rate in states led by GOP officials is 4.6%, while states led by Democratic officials have an average unemployment rate of 6.3%.
"We’re going to see these fissures manifesting long term in different economies around the country," Scott said.
"In Republican states, the focus is on returning to work and the benefit of that is the preservation of the jobs that are open and it’s easier to see the economic recovery go faster when people are returning to work versus in blue states where extending benefits erodes work and long-term will have an impact on the jobs even available in the workforce," he said.
Several Republican-run states have opted out of federal unemployment benefits in an effort to incentivize people to get back into the job market. Red states are focused on "opportunity and options in the workplace," which will lead to a healthier, faster and sustained recovery, Scott said, while Democrat-run states are focused on government support and assistance, "which will not lead to a stronger economy."
Meanwhile, President Biden has pitched two additional big spending plans, the American Jobs Plan and American Families Plan, which combined are projected to cost nearly $4 trillion. But unlike the rescue plan, the families plan isn’t eligible to be steamrolled through Congress without Republican support.
And while much of the infrastructure plan can be pushed through using the vehicle of reconciliation, Scott said some aspects will require compromise and Democrats should start by eliminating policy measures seen as irreconcilable with Republicans in order to drive the price tag down.
"The Green New Deal – the environmentally friendly infrastructure policies that force Americans to make decisions that they would not normally make – a lot of that we could do battle with," Scott said.
Democrats are under pressure to find compromise on Biden’s sweeping, transformative agenda before Congress adjourns for the summer. Scott has pushed for the expansion of "opportunity zones," which create federal tax incentives in economically distressed areas to drive up private investment.
Another member of Congress from South Carolina, Democratic Rep. Jim Clyburn, proposed his own 10-20-30 plan focused on adding federal accounts targeting persistently impoverished communities.
Clyburn’s plan would have the government do more of the work than the private sector, Scott said.
"I think it’s just a conviction on the side of the left that they believe the government is better suited to create jobs," Scott said. "Having been a job creator in a former life, I know that’s not true. Having lived in poverty, I know that the government can make you a little more comfortable in your poverty but they don’t have an exit strategy that helps you get out of poverty."
"What we are doing on the right is helping eliminate poverty and giving you reasons to be hopeful about the future and what you can do to make your life better as opposed to what the government can do."
"We’re just philosophically disconnected and opportunity zones finds itself in the crosshairs," Scott said.
The senator pointed out that some Democratic mayors, such as Rock Hill, South Carolina, Mayor John Gettys, have transformed poverty in their cities, with new funding available to build affordable housing. He also cited Birmingham, Alabama, and Erie, Pennsylvania, where the Democratic mayors have praised the positive impacts of opportunity zones.
"There is a bipartisan coalition supporting opportunity zones – it’s just not members of Congress," Scott said.
Speaking on the first anniversary of George Floyd’s death, Scott, who’s led Republican negotiations on the George Floyd Justice in Policing Act in the Senate, said he was hopeful to get the federal police reform package passed by June. Biden had set the deadline for May 25.
"My prediction is June will be the month to remember. We will either get it done or we won’t. But I hope that we will see some success," Scott said, explaining lawmakers met with police groups over the weekend. "I am hopeful that we are making meaningful progress in a reasonable time. And June will be the month to remember when we’re talking about what we did and not what we’re going to do."
Scott explained that policies, such as opportunities zones, could not have prevented Floyd’s death.
"Hate in your heart is something that you can’t legislate against," he said. "There’s not an antidote for all negative interactions between law enforcement and the community that I know of – but the closest thing I know of is opportunity and success. Those two seem to break the pipeline between early life and being a part of the criminal justice system."
FOX Business' Megan Henney, Brooke Singman and Morgan Phillips contributed to this report.