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Good morning. President Biden is placing a big bet on full employment.
Over the past two decades, people who make economic forecasts for living have repeatedly made the same mistake: they have been very optimistic.
Wall Street economists have done it, as do officials from the Federal Reserve and other government agencies. I dug through recently The last 15 years of GDP forecasting By professional forecasts – all were made two years ago – and you can see the results here:
In 12 out of 15 years, the average forecast was very fast. And the eight biggest errors were all in the direction of over-excitement.
These mistakes were the real cost. Policy-makers believe it was stronger than the economy, doing little to encourage and do growth Too worried About whether a hot economy can induce inflation. Fed officialsFor example, interest rates have been less aggressive in reducing, as they later acknowledged was appropriate. Congress and White House officials sometimes noted losses and failed to encourage job growth.
As a result, the US has rarely reached a stage that economists describe as full employment, when the economy is running close to capacity and almost everyone who wants a job has one.
Large parts of the economy were spent 1940s, ’50s and’ 60s Near full employment, with an unemployment rate of about 4 percent or less – and wages rose. The country gained full employment in the late 90s and briefly did it again before the epidemic began. Again, income not only increased, but also for income.
“In recent years, America has spent very little time in this holy place, economists call ‘full employment’.” The Wall Street Journal wrote last week. If the Biden administration has an initial economic goal, it is to return the country to that place.
Why are the economists fighting
The goal helps to explain an argument that has recently broken down among top economists.
Many who normally support aggressive government action to prevent economic recession – such as Olivier blanchard, A former International Monetary Fund official, and Larry Summers, The former Treasury Secretary – has drawn much criticism from President Biden’s proposed $ 1.9 trillion virus relief bill. He argues that after many people are vaccinated later this year, the economy can recover strongly on its own.
Why? consumer loans Relatively few, and many homes are in good financial shape, due to the mix A high savings rate, Rising home prices and rising share prices. And Congress passed a $ 900 billion stimulus package in December.
Given all of this, critics say Biden’s $ 1.9 trillion stimulus program is unnecessary and could lead to inflation, which would then lead the Federal Reserve to raise interest rates. “Why force the Fed to cancel some packages of force?” Blanchard wrote. (Made somers Long version of the case In Washington Post op-ed.)
Biden allies counter that normality – when a vast majority of Americans have been vaccinated – months away. Last week’s jobs report shows The economy is down, And some coronovirus benefit programs scheduled to end next month. Without a big new package, Janet YellenThe Treasury Secretary said on CNN yesterday, “a long, slow recovery through the economy.”
Biden who accepts risk
It is impossible to know which side is correct. Both make credible cases, and the future is inherently uncertain.
But the strongest part of the Biden argument may be its recognition of recent history. The American economy has struggled to grow at a healthy pace over the past two decades, and policymakers have repeatedly done little to help it. Biden is choosing not to make the same error again and making full employment his No. 1 goal, even the risk that approach brings.
“The idea that we should come back out of fear of the future, which perhaps we can do too much, is simply not consistent with the economic evidence we have before us,” Heather bushi, A member of Biden’s Economic Advisory Council, told Reuters. “The cost of distant inactivity probably surpasses the costs of doing a little too much.”
Full employment brings benefits that are otherwise very difficult to obtain. It increases income – And national mood, As it did in the late 1990s. It reduces poverty without relying on government spending. It helps workers develop skills that improve their long-term prospects.
Another Biden consultant, as Boushey and Jared Bernstein, wrote In a recent White House blog post, “Going back to full employment, as soon as possible, will bring a major change in the lives of millions, especially those at risk of being left behind.”
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Art and IDEAS
How pop culture is portraying the epidemic
Is it possible to have great entertainment about the continuing global crisis – and will people watch it? Hollywood and TV networks believe so.
HBO Max has already released “Stop it, “Which follows an unhappy couple (Anne Hathaway and Chiwetel Ejiofor) who use quarantine to plot an heir. The ABC medical drama” Grey’s Anatomy “has dedicated its 17th season to Coronovirus, Which has many characters falling ill. On the NBC sitcom “Superstore”, the main characters take their breaks in a ventilated warehouse to stay away. And many other shows, such as “NCIS: New Orleans”, plotlines include masks.
It is still too early to anticipate hunger for such shows. There has been no migration about the epidemic. But directors and writers say they need to try.
Jonathan Green said, “Our show takes place in a store,” Schröner of Superstore “told The Times.” We felt like it could be really distracting if it was business as usual. ” There is also precedent. “Locked Down” screenwriter Steven Knight said that World War II gave birth to novels, films and comic books quickly. By 1940, Charlie Chaplin starred A satire about the Nazis called “The Great Dictator” And “Casablanca” surfaced two years later.
“In the middle of the war, you don’t know who is going to win. You don’t know what’s going to happen, ” Knight said. “And I think it’s important to capture that phase of uncertainty as it really was.”