Allison Schrager has a common-sensical take (as she usually does) on the coming fiscal stimulus, which has reached an approval rating of about 70% according to a recent poll. Nothing in America polls at 70% except bacon.
So why not do more? Why not go even bigger? If we can do it, why shouldn’t we do it?
So, will a $1.9 trillion relief package cause runaway inflation or a spike in interest rates? Probably not, at least not right away. But that doesn’t mean that it doesn’t pose costs and risks. I agree that we risk overheating the economy. But the costs of overheating aren’t just higher employment and inflation—we’re also introducing a distortion on prices and the price of risk, and that tends to have unintended consequences. Also, I’m not comfortable with the precedent that every time we have a shock, we send people checks (paid for by monetized debt), whether or not they suffered any actual economic setbacks. Relief for economic hardship is one thing, but “let’s send everyone money the Fed printed” just to make Americans happy is another.
Also, you can’t have it both ways. A structural change can mean that there’s less cost to carrying debt than there was in 1974, but it could also mean that there are fewer benefits, too, and I haven’t heard the benefits of the stimulus well-argued. Have you?
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