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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsBiden and the Fed Leave 1970s Inflation Fears Behind
WASHINGTON Presidents who find themselves digging out of recessions have long heeded the warnings of inflation-obsessed economists, who fear that acting aggressively to stimulate a struggling economy will bring a return of the monstrous price increases that plagued the nation in the 1970s.
Now, as President Biden presses ahead with plans for a $1.9 trillion stimulus package, he and his top economic advisers are brushing those warnings aside, as is the Federal Reserve under Chair Jerome H. Powell.
After years of dire inflation predictions that failed to pan out, the people who run fiscal and monetary policy in Washington have decided the risk of overheating the economy is much lower than the risk of failing to heat it up enough.
Democrats in the House plan to spend this week finalizing Mr. Bidens plan to pump nearly $2 trillion into the economy, including direct checks to Americans and more generous unemployment benefits, with the aim of holding a floor vote as early as next week. The Senate is expected to quickly take up the proposal as soon as it clears the House, in the hopes of sending a final bill to Mr. Bidens desk early next month. Fed officials have signaled that they plan to keep holding rates near zero and buying government-backed debt at a brisk clip to stoke growth.
The Fed and the administration are staying the course despite a growing outcry from some economists across the political spectrum, including Lawrence Summers, a former Treasury secretary and top adviser in the Clinton and Obama administrations, who say Mr. Bidens plans could stir up a whirlwind of rising prices.
No one better embodies the sudden break from decades of worry over inflation in Washington and elite circles of economics than Janet L. Yellen, the former Federal Reserve chair and current Treasury secretary. Ms. Yellen spent the bulk of her career fighting in a war against inflation that economists have been waging for more than a half century. But at a time when the American economy remains 10 million jobs short of its pre-pandemic levels, and millions of people face hunger and eviction, she appears to be ready to move on.
https://www.nytimes.com/2021/02/15/business/economy/biden-fed-inflation-covid.html?action=click&module=Spotlight&pgtype=Homepage
PoindexterOglethorpe
(25,997 posts)are not necessarily relevant to today?
Perhaps the essential and underlying problem of economists is that they live in the distant past.
There has been essentially no inflation for at least two decades. Wouldn't you think economists would have noticed that at least ten years ago?
Oh, dear lord. There is a reason that they don't have much standing in the real world.
oioioi
(1,127 posts)bucolic_frolic
(44,069 posts)as such the economy of the 70s was more susceptible to inflation - more money chasing fewer or the same amount of goods. Plus there was de facto currency devaluation from OPEC oil price increases, and energy was scarce. You can see that things are different now. There are so many suppliers of everything that profits are slim, and consumers have many choices. More to the point, the Fed is involved with the puzzle of how to create 2% inflation rather than worrying about 6% inflation.
IronLionZion
(45,891 posts)because of fracking and then less travel due to COVID.
jaxexpat
(7,058 posts)A time when Republicans may run the executive branch, again, and take credit, again, for the previous years of fiscal wisdom. A time when they'll convince enough low-info people that they deserve a tax cut "reward" and start the whole "business" cycle again.
It's just like I've been here before, again, once more.
bullwinkle428
(20,634 posts)every morning, though.