 | | A sign calling on Congress to provide Covid-19 relief displayed on North Capitol Street in Washington, D.C.Stefani Reynolds for The New York Times |
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So the American Rescue Plan is actually happening. Given the scale of what has just been accomplished and the difference it will make to millions of lives, any personal sense of relief for those of us who don't need (and won't get) financial help is, of course, irrelevant. But maybe it's worth pointing out just how gratifying this whole process has been for those of us with bitter memories of the great Obama undershoot, when what was billed as a massive stimulus actually fell drastically short of what was needed. |
One source of gratification is, of course, the fact that the basics of the plan came through intact — it wasn't watered down in a vain attempt to win over moderate Republican senators (who basically don't exist). Even a couple of weeks ago smart people — like economists at major banks — were assuring me that the final plan would be a lot smaller than the original ask of $1.9 trillion. It wasn't. |
There was, to be fair, one big fail: no minimum wage hike, let alone the proposed $15. But that always looked like a long shot. I assume that it will get put forth as stand-alone legislation, and we'll see whether Republicans are willing to vote against such an overwhelmingly popular measure. But overall, Senate Democrats were remarkably successful at going big. |
There was, however, another source of gratification, at least for nerds like me: the stupidity level in the economic debate was astonishingly low compared with what went down in 2009-2010. Where were the cable TV ranters and op-ed writers predicting hyperinflation, the collapse of the dollar, frogs, boils and three days of darkness? |
OK, there were a few of them out there, but they were hard to find. Instead, the usual suspects were preoccupied with the threat of cancel culture. |
There was, of course, debate about the appropriateness of the Biden plan — mainly about whether it was so big that it would overheat the economy, causing inflation. But this dispute was like something out of another era: a real argument between smart, well-informed economists (all of whom, probably not accidentally, are more or less on the center left). When I debated Larry Summers — he's worried about overheating, I'm not — we were arguing from a shared set of facts and even a largely shared conceptual framework. |
Indeed, I almost felt like pinching myself to be sure I was awake. This was what I thought I was signing up for all those years ago when I chose economics as a profession; instead, I mostly find myself arguing with zombies. So this was a nice break. |
Of course, I'm right and Larry is wrong, although I would say that, wouldn't I? And time will tell. |
For what it's worth, however, with the passage of the Biden plan the business economists regularly surveyed by Bloomberg have ratcheted up their forecasts for growth this year — and what they seem to be predicting is a Goldilocks economy. |
Let me explain: The average forecast calls for 5.5 percent growth from the fourth quarter of 2020 to the fourth quarter of 2021. That sounds like a lot. But the Congressional Budget Office estimates that in late 2020 we had a 3 percent "output gap" — a shortfall below the economy's potential. And growth is chasing a moving target, because standard estimates say that the economy's potential is growing around 2 percent a year. So the average forecast says that by the end of this year we'll be just about at potential — not too cold, not too hot, but just right. |
Some forecasts disagree, of course. Goldman Sachs is more optimistic (and so am I), predicting 7.7 percent growth. But Goldman also believes that the output gap is 6 percent, not 3. So they're also predicting Goldilocks. |
Now, all forecasts are wrong. Also, some prices probably will spike because of temporary bottlenecks: prices of commodities like oil and copper have been surging. |
Overall the next year is looking remarkably good. Any euphoria some of us might be feeling (but are economists even capable of euphoria?) will no doubt evaporate as tougher problems arise. But let's enjoy this Goldilocks moment. |
I'm sometimes embarrassed at how much I use Excel. But it turns out to be a work of genius. |
Democrats learned from the mistakes of the last crisis. Britain's Tories haven't. |
Fox News couldn't be bothered to talk about stimulus, given the more pressing issue of Dr. Seuss. |
Never mind oil and copper: There's a feta cheese shortage. |
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 | | Lots of bad economics in the 70s, but some darn good musicYouTube |
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Actually, don't stop thinking about 2021Q4. |
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