Larry Summers criticizes stimulus plan and is seeing worst Marcoeconomic policies in 40 years

[Former President tack50]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Do you even know what hyper-inflation is?

It’s not 7%

But yes, the largest GDP growth in decades and virtually full employment sure is the result of the worst macro-economic policies in decades.

High inflation affects more people than semi high unemployment does and the unemployment rate wasn’t even high in March of 2021. Unemployment had already dropped from 14.8% to 6% by March of 2021 yet the economic situation was treated as if it was another 2008-09.

https://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx

As someone who lived through 25%+ unemployment, I will vehemently disagree with that take. I'll take high-ish inflation but low unemployment over low inflation but very high unemployment.

[OSR stands with Israel]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Do you even know what hyper-inflation is?

It’s not 7%

But yes, the largest GDP growth in decades and virtually full employment sure is the result of the worst macro-economic policies in decades.

High inflation affects more people than semi high unemployment does and the unemployment rate wasn’t even high in March of 2021. Unemployment had already dropped from 14.8% to 6% by March of 2021 yet the economic situation was treated as if it was another 2008-09.

https://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx

As someone who lived through 25%+ unemployment, I will vehemently disagree with that take. I'll take high-ish inflation but low unemployment over low inflation but very high unemployment.

25% unemployment is way above semi high though while our unemployment rate in March 2021 was below Semi High (we were at 6%).

[President Punxsutawney Phil]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Do you even know what hyper-inflation is?

It’s not 7%

But yes, the largest GDP growth in decades and virtually full employment sure is the result of the worst macro-economic policies in decades.

I will say I'll take the current US situation (huge GDP growth, incredibly good job market, very high inflation) over our current situation (mediocre to bad GDP growth, good job market, inflation that's just as high)

The only advantage I can see to the EU's situation is that core inflation is lower, but even that advantage seems to be quickly vanishing, with inflation that's just as high.

This is not unreasonable of a take.
I will note that whether or not a macroeconomic policy causes more inflation is distinct to whether it's actually worthwhile, even if, as already noted, one should keep an open mind and not immediately judge a given policy on popularity-based indicators either way.
Imo, the Federal Reserve should be telegraphing a lot of rate increases and let others have the chance to adjust. We need to significantly curtail the era of easy money.

[Former President tack50]

Didint Spain and France have issues before the pandemic with job growth and employment ?

Idk about France, but job growth was good pre-pandemic here. Issue is, when you are trying to go down from a high of 26.5%, it takes a long time to do so, unlike the way up with is much faster. In any case, Spanish unemployment went from said high of 26.5% in mid 2013 to a low of 14% by the end of 2019.

For a comparison, in the previous recovery (from the 1993 crisis, which was waaaay milder even if unemployment was high) it also took 6 years to reduce unemployment those same 12 percentage points (March 1994-March 2000). Of course there was no global pandemic in 2000 to stop that.

[Associate Justice PiT]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Do you even know what hyper-inflation is?

It’s not 7%

But yes, the largest GDP growth in decades and virtually full employment sure is the result of the worst macro-economic policies in decades.

High inflation affects more people than semi high unemployment does and the unemployment rate wasn’t even high in March of 2021. Unemployment had already dropped from 14.8% to 6% by March of 2021 yet the economic situation was treated as if it was another 2008-09.

https://www.ncsl.org/research/labor-and-employment/national-employment-monthly-update.aspx

As someone who lived through 25%+ unemployment, I will vehemently disagree with that take. I'll take high-ish inflation but low unemployment over low inflation but very high unemployment.

     Unemployment typically needs to hit a certain tipping point to really spur popular discontent. Within the ranges that it normally fluctuates, it contributes little to the general sense of the condition of the economy. That's why even though unemployment percentage is back down to late 2019 numbers, people surveyed give poor marks to the health of the economy.

[Saint Milei]

Welcome stagflation

[jojoju1998]

Welcome stagflation

Stagflation assumes that we also have stagnant GDP growth, and a higher unemployment rate. Right now the rate is 3.6 percent. Which is very low. To contrast, the unemployment rate in the 1970s was  constantly in the 9 percentage.

[TheDeadFlagBlues]

I wouldn't take Jason Furman's ancedote too seriously. One thing to keep in mind about "academic macroeconomists" is that they are a very non-American bunch. A disproportionate share of them hail from middle income countries or places like Argentina or Italy etc. For this reason, academia was always going to more hostile to the American Rescue Plan - Italians, Argentines, Turks and others will always be concerned about inflation - than the corridors of power in this country where the typical economist is much more likely to have an American background.

I would estimate that ~50% of economists in policy world were concerned but this concern was more like "let's keep an eye on this" and the desire for the ARP to be smaller was pretty vague. Few were concerned about inflation - this is trivial to see, as public institutions did not care about inflation and they listen to their economists. As Jason Furman himself pointed out in other tweets no one forecasted this inflation. If you didn't make a numerical prediction and only made some vague rhetorical gestures, why should I care?

[Buffalo Mayor Young Kim]

Welcome stagflation

Stagflation assumes that we also have stagnant GDP growth, and a higher unemployment rate. Right now the rate is 3.6 percent. Which is very low. To contrast, the unemployment rate in the 1970s was  constantly in the 9 percentage.

The thinking re: The economy is that it's always the late 70s. Actual numbers be damned.

Larry Summers's advice was 'intentionally prolong the COVID depression so that inflation doesn't happen'

It's an insane plan that people are just gloming onto because inflation scary.

[OSR stands with Israel]

Welcome stagflation

Stagflation assumes that we also have stagnant GDP growth, and a higher unemployment rate. Right now the rate is 3.6 percent. Which is very low. To contrast, the unemployment rate in the 1970s was  constantly in the 9 percentage.

The thinking re: The economy is that it's always the late 70s. Actual numbers be damned.

Larry Summers's advice was 'intentionally prolong the COVID depression so that inflation doesn't happen'

It's an insane plan that people are just gloming onto because inflation scary.

The unemployment rate has already dropped to 6% by March of 2021 so it’s absurd to say we were in a depression in March of 2021.

[GeneralMacArthur]

What we're experiencing right now is the opposite of stagflation.

Stagflation is when you have high unemployment and low growth, accompanied by high inflation.

What we have right now is extremely low unemployment and normal growth, accompanied by high inflation.  It's just normal inflation.

People just say "stagflation" because most people don't know what it means, but it's a really scary word because it conjures up memories of the bad economy of the 1970s.  So if you just start threatening that our inflation will turn into stagflation people will freak out even if you're talking nonsense.

BTW another common misconception is that stagflation was a Carter thing.  It was a Nixon/Ford thing.

[I Will Not Be Wrong]

Regardless, I think that we really need to get a climate change bill passed this year, even if it's one that is not ideal. Any chance that still happens?

[Dr Oz Lost Party!]

Welcome stagflation

Please take a basic macroeconomics course, or at least google what stagflation actually is, before you embarrass yourself like this. Stagflation is high inflation + high unemployment. The latter is high, obviously, but unemployment is at pre-pandemic levels.

[GeneralMacArthur]

What I don't remember anyone predicting was just how stubborn this administration would be in refusing to admit to the mistake. They have denied the problem. They have deflected blame. They prefer to talk about anything else. It's just been lame excuse after lame excuse.

...and of course I write this on the day that both Joe Biden and Janet Yellen do their most direct mea culpae yet on the subject:

To be clear, the quote in the article is her saying she was wrong because she didn't anticipate the Chinese lockdowns and the war in Europe.  Not that she was wrong on any particular economic fundamental.

[Benjamin Frank]

I didn't even know that Marco Rubio had any economic policies, yet alone having marco economic policies that go back 40 years.

[Benjamin Frank]

What we're experiencing right now is the opposite of stagflation.

Stagflation is when you have high unemployment and low growth, accompanied by high inflation.

What we have right now is extremely low unemployment and normal growth, accompanied by high inflation.  It's just normal inflation.

People just say "stagflation" because most people don't know what it means, but it's a really scary word because it conjures up memories of the bad economy of the 1970s.  So if you just start threatening that our inflation will turn into stagflation people will freak out even if you're talking nonsense.

BTW another common misconception is that stagflation was a Carter thing.  It was a Nixon/Ford thing.

There was both high unemployment (relative to the 50s and 60s) and high inflation under Ford and Nixon, but the 'stag' part of stagflation (as well as a sharp rise in inflation) only became a thing with the Arab oil embargo that started in 1979.

[Benjamin Frank]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Not that I think Summers is, well, completely right about the stimulus even in hindsight, people were way too dim in their assessment of him.

Even without hindsight, it was clear that the stimulus bill would be inflationary. The economy was already bouncing back fast at that point and unemployment rate had already plummeted so throwing 2 trillion dollars into the economy would be extremely inflationary.

It’s just that every democrat by that point thought every economic situation was another 2008-09 and reacted the way they wished they did to 08-09.

Indeed, it was clear it would be inflationary.
As PiT put it, Atlas simply proved itself once again incapable of serious analysis.
You can't necessarily assume that a policy is inherently the best course of action merely because a political party decided on that course of action. One ought to be open-minded to other possibilities, no matter how unpopular they may be at the time.

You realize that their are factors other than inflation right?
Like employment and GDP and wages?

And that current inflation is driven far more by transit and production issues than spending.

And frankly I’ve never seen you base your options on anything other than knee jerk contrarianism. So you know, glass houses.

Mainstream economic theory could have told you that dumping trillions into the economy increases inflation.
Also, I doubt my utter hatred of Louis DeJoy could be explained by some kind of "knee jerk contrarianism". But you do you.

Well, unlike most people here, I actually am an economist, and
1.It was not certain at all, even Larry Summers was not certain initially. Larry Summers has an ego the size of Manhattan with an equally large need to be in charge. What Summers actually said and what he now claims he said are two entirely different things.

2.There are other factors causing the inflation: the supply chain issues, the (semi) embargo of Russian oil, global warming causing a decline in food production in 2021...

3.There was not 'trillions' dumped into the economy in one go, it was spread out over 5-10 years, depending on which you are referring to. The Infrastructure package is over 10 years, the so-called stimulus had some immediate spending, yes, mostly in the form of checks sent to the public (if you want to send yours back...) but also sent a lot of money to the states that will likely take them several years to spend.

The money sent out to individuals and businesses was mostly to make up for their lost income during the pandemic.  It's unfortunate nobody (including Larry Summers) was fully aware of the supply chain bottlenecks and other problems that may have led to these checks being inflationary. Of course, even this is actually debatable since those checks were sent out about one year before inflation started to pick up steam.


It's the people who minimize these things who are incapable of serious analysis.

[President Punxsutawney Phil]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Not that I think Summers is, well, completely right about the stimulus even in hindsight, people were way too dim in their assessment of him.

Even without hindsight, it was clear that the stimulus bill would be inflationary. The economy was already bouncing back fast at that point and unemployment rate had already plummeted so throwing 2 trillion dollars into the economy would be extremely inflationary.

It’s just that every democrat by that point thought every economic situation was another 2008-09 and reacted the way they wished they did to 08-09.

Indeed, it was clear it would be inflationary.
As PiT put it, Atlas simply proved itself once again incapable of serious analysis.
You can't necessarily assume that a policy is inherently the best course of action merely because a political party decided on that course of action. One ought to be open-minded to other possibilities, no matter how unpopular they may be at the time.

You realize that their are factors other than inflation right?
Like employment and GDP and wages?

And that current inflation is driven far more by transit and production issues than spending.

And frankly I’ve never seen you base your options on anything other than knee jerk contrarianism. So you know, glass houses.

Mainstream economic theory could have told you that dumping trillions into the economy increases inflation.
Also, I doubt my utter hatred of Louis DeJoy could be explained by some kind of "knee jerk contrarianism". But you do you.

Well, unlike most people here, I actually am an economist, and
1.It was not certain at all, even Larry Summers was not certain initially
2.There are other factors causing the inflation: the supply chain issues, the (semi) embargo of Russian oil....
3.There was not 'trillions' dumped into the economy in one go, it was spread out over 10 years.

It's the people who minimize these things who are incapable of serious analysis.

To be clear, I agree that there are multiple factors that are increasing inflation right now. But nonetheless, I take the view that stimulus is clearly increasing inflation on net. Also, per my posts above, I have already indicated that I think that "does X cause inflation" is a separate question from "should we do X".
I'm not sure if I agree or disagree with Summers' take overall. I would have to look at it in detail, from a source that does not prejudge it as either right or wrong.

[Benjamin Frank]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Not that I think Summers is, well, completely right about the stimulus even in hindsight, people were way too dim in their assessment of him.

Even without hindsight, it was clear that the stimulus bill would be inflationary. The economy was already bouncing back fast at that point and unemployment rate had already plummeted so throwing 2 trillion dollars into the economy would be extremely inflationary.

It’s just that every democrat by that point thought every economic situation was another 2008-09 and reacted the way they wished they did to 08-09.

Indeed, it was clear it would be inflationary.
As PiT put it, Atlas simply proved itself once again incapable of serious analysis.
You can't necessarily assume that a policy is inherently the best course of action merely because a political party decided on that course of action. One ought to be open-minded to other possibilities, no matter how unpopular they may be at the time.

You realize that their are factors other than inflation right?
Like employment and GDP and wages?

And that current inflation is driven far more by transit and production issues than spending.

And frankly I’ve never seen you base your options on anything other than knee jerk contrarianism. So you know, glass houses.

Mainstream economic theory could have told you that dumping trillions into the economy increases inflation.
Also, I doubt my utter hatred of Louis DeJoy could be explained by some kind of "knee jerk contrarianism". But you do you.

Well, unlike most people here, I actually am an economist, and
1.It was not certain at all, even Larry Summers was not certain initially
2.There are other factors causing the inflation: the supply chain issues, the (semi) embargo of Russian oil....
3.There was not 'trillions' dumped into the economy in one go, it was spread out over 10 years.

It's the people who minimize these things who are incapable of serious analysis.

To be clear, I agree that there are multiple factors that are increasing inflation right now. But nonetheless, I take the view that stimulus is clearly increasing inflation on net. Also, per my posts above, I have already indicated that I think that "does X cause inflation" is a separate question from "should we do X".
I'm not sure if I agree or disagree with Summers' take overall. I would have to look at it in detail, from a source that does not prejudge it was either right or wrong.

I'm not sure how the stimulus could be contributing to inflation right now when the vast majority of the initial stimulus spending occurred at least one year ago.

If you are interested in what Summers said in detail, this is his initial discussion with Paul Krugman:

I listened to the entire debate/discussion over a year ago, and he did not say then what he now claims he said.  It's over an hour long and is pretty dry and technical. Other than Torie, I'd be surprised if anybody else here has listened to it, and I'd be even more surprised if anybody in the media who is now treating Summers as if he's some kind of economic guru have listened to it either. 

[President Punxsutawney Phil]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Not that I think Summers is, well, completely right about the stimulus even in hindsight, people were way too dim in their assessment of him.

Even without hindsight, it was clear that the stimulus bill would be inflationary. The economy was already bouncing back fast at that point and unemployment rate had already plummeted so throwing 2 trillion dollars into the economy would be extremely inflationary.

It’s just that every democrat by that point thought every economic situation was another 2008-09 and reacted the way they wished they did to 08-09.

Indeed, it was clear it would be inflationary.
As PiT put it, Atlas simply proved itself once again incapable of serious analysis.
You can't necessarily assume that a policy is inherently the best course of action merely because a political party decided on that course of action. One ought to be open-minded to other possibilities, no matter how unpopular they may be at the time.

You realize that their are factors other than inflation right?
Like employment and GDP and wages?

And that current inflation is driven far more by transit and production issues than spending.

And frankly I’ve never seen you base your options on anything other than knee jerk contrarianism. So you know, glass houses.

Mainstream economic theory could have told you that dumping trillions into the economy increases inflation.
Also, I doubt my utter hatred of Louis DeJoy could be explained by some kind of "knee jerk contrarianism". But you do you.

Well, unlike most people here, I actually am an economist, and
1.It was not certain at all, even Larry Summers was not certain initially
2.There are other factors causing the inflation: the supply chain issues, the (semi) embargo of Russian oil....
3.There was not 'trillions' dumped into the economy in one go, it was spread out over 10 years.

It's the people who minimize these things who are incapable of serious analysis.

To be clear, I agree that there are multiple factors that are increasing inflation right now. But nonetheless, I take the view that stimulus is clearly increasing inflation on net. Also, per my posts above, I have already indicated that I think that "does X cause inflation" is a separate question from "should we do X".
I'm not sure if I agree or disagree with Summers' take overall. I would have to look at it in detail, from a source that does not prejudge it was either right or wrong.

I'm not sure how the stimulus could be contributing to inflation right now when the vast majority of the initial stimulus spending occurred at least one year ago.

If you are interested in what Summers said in detail, this is his initial discussion with Paul Krugman:

I listened to the entire debate/discussion over a year ago, and he did not say then what he now claims he said.  It's over an hour long and is pretty dry and technical. Other than Torie, I'd be surprised if anybody else here has listened to it, and I'd be even more surprised if anybody in the media who is now treating Summers as if he's some kind of economic guru have listened to it either. 

Thanks for the video. I'll check it out if I can find the time to do so.
Also, why wouldn't stimulus that happened a year or a year-and-a-half ago increase inflation? The impact on the money supply being expanded that much doesn't necessarily dissipate that quickly, does it?

[Benjamin Frank]

Guys that’s been wrong about everything is wrong some more

Amazing how 68 people recommended this

Not that I think Summers is, well, completely right about the stimulus even in hindsight, people were way too dim in their assessment of him.

Even without hindsight, it was clear that the stimulus bill would be inflationary. The economy was already bouncing back fast at that point and unemployment rate had already plummeted so throwing 2 trillion dollars into the economy would be extremely inflationary.

It’s just that every democrat by that point thought every economic situation was another 2008-09 and reacted the way they wished they did to 08-09.

Indeed, it was clear it would be inflationary.
As PiT put it, Atlas simply proved itself once again incapable of serious analysis.
You can't necessarily assume that a policy is inherently the best course of action merely because a political party decided on that course of action. One ought to be open-minded to other possibilities, no matter how unpopular they may be at the time.

You realize that their are factors other than inflation right?
Like employment and GDP and wages?

And that current inflation is driven far more by transit and production issues than spending.

And frankly I’ve never seen you base your options on anything other than knee jerk contrarianism. So you know, glass houses.

Mainstream economic theory could have told you that dumping trillions into the economy increases inflation.
Also, I doubt my utter hatred of Louis DeJoy could be explained by some kind of "knee jerk contrarianism". But you do you.

Well, unlike most people here, I actually am an economist, and
1.It was not certain at all, even Larry Summers was not certain initially
2.There are other factors causing the inflation: the supply chain issues, the (semi) embargo of Russian oil....
3.There was not 'trillions' dumped into the economy in one go, it was spread out over 10 years.

It's the people who minimize these things who are incapable of serious analysis.

To be clear, I agree that there are multiple factors that are increasing inflation right now. But nonetheless, I take the view that stimulus is clearly increasing inflation on net. Also, per my posts above, I have already indicated that I think that "does X cause inflation" is a separate question from "should we do X".
I'm not sure if I agree or disagree with Summers' take overall. I would have to look at it in detail, from a source that does not prejudge it was either right or wrong.

I'm not sure how the stimulus could be contributing to inflation right now when the vast majority of the initial stimulus spending occurred at least one year ago.

If you are interested in what Summers said in detail, this is his initial discussion with Paul Krugman:

I listened to the entire debate/discussion over a year ago, and he did not say then what he now claims he said.  It's over an hour long and is pretty dry and technical. Other than Torie, I'd be surprised if anybody else here has listened to it, and I'd be even more surprised if anybody in the media who is now treating Summers as if he's some kind of economic guru have listened to it either.  

Thanks for the video. I'll check it out if I can find the time to do so.
Also, why wouldn't stimulus that happened a year or a year-and-a-half ago increase inflation? The impact on the money supply being expanded that much doesn't necessarily dissipate that quickly, does it?

The stimulus wouldn't expand the money supply. Only the Federal Reserve printing money does that (of course, they did do that via quantitative easing.) You are referring to the idea of the 'multiplier effect.' If the multiplier effect was going to cause inflation here (especially a large increase in inflation as we've seen here), it's unlikely it would have been that long a delayed reaction.  

This article provides a good distinction between a fiscal multiplier effect (The Keynesian Multiplier) via an increase in government borrowing (either spending increases or tax cuts) and a monetary money supply multiplier via the Federal Reserve money printing (or reducing reserve ratios requirements as is the example given in the article.)
https://www.investopedia.com/terms/m/multipliereffect.asp

I also think it would have dissipated more by now given that there aren't the cost of living increases (COLAs) in labor agreements to anywhere near the same extent as there was in the 1970s that allowed for the 'inflation expectation hypothesis' to occur.

This is not to say that it hasn't had any impact. Not only have there been many people receiving large nominal wage increases, but there have been many people quitting jobs due to their inability to get wage increases which has also contributed to the supply chain issues. So, I agree these issues can't necessarily be easily disentangled.

Of course, if Republicans truly believed that the stimulus package is the reason for the high inflation, then they should support reversing the stimulus package by raising taxes.

Not to get too technical, but to be a completist here, I think most economists now dismiss the notion of reducing reserve ratios having any impact on any multiplier. That is based on an old idea that (private) banks are limited to lending based on their reserve requirements based on physical cash holdings. In reality, banks these days can print up money anytime they want 'out of the ether.' (Or what the Bank of England refers to as 'fountain pen money.')

[Benjamin Frank]

Forgot to mention this.

The point I wanted to make here initially is it shows how sensationalist and intention seeking that Summers is that he would make this comment when easily the W Bush tax cuts that took 'surpluses as far as the eyes can see' and turned them into 'deficits as far as the eyes can see' combined with the W Bush Administration intentional lack of regulating the banks that led to the Financial Meltdown of 2008 are easily the worst macroeconomic policies of the last 40 years.

The Reagan Administration tax and labor policies that contributed to the increase in income and wealth inequality are also easily worse macroeconomic policies than those of the Biden Administration. Of course, Summers is pretty much a fighter for the genuine elite, so it's not a surprise that he'd disagree with that.

[GeneralMacArthur]

The Bipartisan Infrastructure Framework is spending spread out over ten years.  Very little of it has been spent yet.  It is not contributing to inflation.

So when people criticize the administration's policies for contributing to inflation (student loan repayment nonwithstanding, which will absolutely contribute to inflation) they are mostly criticizing the American Rescue Plan (although they will typically hand-wave and say "tons of spending" to try and trick you into mentally including BIF as well).

So just as a reminder, here's what was in the American Rescue Plan.

$424 billion for the $1,400 checks.  These were so stupid, I hated this policy so much and all it's done is encourage people to demand more direct cash entitlements from the government for no reason other than "I feel bad."  However, it's doubtful this is contributing to inflation today since it was only $1,400 per family.  Who's running around spending a bunch of extra money today because they got a single $1,400 check more than a year ago?

$350 billion to balance state and local government budgets that were all f---ed up from COVID.  I don't see any way you can argue that this contributed to inflation.  Similarly there was about $100 billion to make pension funds solvent.

$246 billion to create $300 weekly unemployment benefits through September 2021.  The only people getting this were unemployed people, most of whom needed the money and spent it immediately on necessities.  I don't think this contributed to inflation.

Child tax credit increased from $2,000 to $3,600 -- this was inflationary and stupid because it wasn't sufficiently means tested.  Couples making $150,000 got the full benefit.  I wish Dems hadn't made this their central talking point about the ARPA because it was probably the most inflationary aspect of the bill.  A comfortable upper-middle-class family with 4 children got $6,000 extra when they absolutely didn't need it.

Paid sick/family leave supplement for employers -- not inflationary because people made the same amount of money either way, they just got extra sick/family leave.

$130 billion to safely reopen schools -- obviously not inflationary since the money was spent immediately, and also helped fight stagflation by allowing working families to stop babysitting their kids all day and return to work, thus lowering unemployment.

About $200 billion for direct action on COVID (mostly vaccine production and distribution and testing sites) this was also obviously not inflationary as the money was spent right away.

About $50 billion for small businesses, most notably the Restaurant Revitalization Fund.  This was inflationary because it was just direct cash handouts, and some of the businesses did not need it.  But this also created tons of jobs by allowing small businesses to survive the pandemic and reopen, so it kept unemployment down, reducing stagflation risk.

About $50 billion in housing/rental aid.  This was also inflationary.

The rest is just miscellaneous tax cuts and targeted aid to hard-hit industries, like farmers, airlines, public transit, etc. none of which I would say was inflationary since those businesses desperately needed the money to bridge budget gaps caused by COVID.

In summary, despite the successful effort by Republicans to smear the ARPA as "just a bunch of handouts that caused inflation", it was actually a mixed bill.  About half of it was highly-specific to COVID, which wasn't inflationary at all.  The other half was a bunch of benefits, grants and welfare.  A lot of this was aimed at reducing unemployment, which was very successful, and good for the economy, even if it did cause some inflation.  The rest was aimed at avoiding a poverty/homelessness crisis, which was necessary but probably not done in the best way (ugh those $1,400 checks were so stupid) and contributed to inflation.  But not as much as people say.

Overall the bill probably had a minor contribution to inflation over the last year, and also did a lot to reduce inflation by rescuing and revitalizing our production to increase supply.  Most of the inflation we are experiencing today is caused by global supply shortages exacerbated by the awful policies of China and Russia.  Other countries are experiencing inflation similar to America and in fact our gas prices remain much lower than those in the rest of the western world.

[GeneralMacArthur]

Yellen was just wrong about concrete events in the material world! She can claim that she was right about "economic fundamentals" if she wants, of course, because they are high-level abstractions and easily abused for the sake of bullsh!ting non-technical audiences.

But Yellen isn't even pretending to advance a technical argument in this article. She simply admits that the administration has been wrong in its insistence that a concrete problem, one that Americans have been experiencing for months, is not a severe problem.

That is closer to where the general interest lies, i.e. with the intuitions that high-profile economists have and choose to convey based on both technical expertise and proximity to power. Yes, they are technical experts, but so are thousands of less prominent economists.

A Larry Summers or a Janet Yellen attracts attention not because they are experts but because they are economist-politicians. We pay attention because they hold or have held prominent places in court, and because we imagine that what they say in public corresponds with what they whisper in the ears of the powerful.

Well, if things had continued to go as smoothly as they were going in 2021 then the concrete problem would, in fact, have ended up not being a severe problem.

The issue at hand is that unforeseeable events in the real world -- namely, China going insane and Russia starting a war with Europe -- have exacerbated the problem and prolonged it to the point where it now has become a severe problem, not just because of its impact, but because it's going to be much more difficult to unravel.

If we returned to the pre-COVID economy tomorrow then most of the inflation would disappear rather quickly.  But we have all these supply chain issues and labor shortages driving up prices, plus the oil crisis caused by the European embargo on Russian oil imports, plus a looming potential wheat crisis, again caused by the war.

[Saint Milei]

Welcome stagflation

Stagflation assumes that we also have stagnant GDP growth, and a higher unemployment rate. Right now the rate is 3.6 percent. Which is very low. To contrast, the unemployment rate in the 1970s was  constantly in the 9 percentage.

Yeah we have sht growth and I don't accept the unemployment numbers