Biden Administration Says Inflation Fears Comes Second

A lot has been written about the ongoing debate on the Biden stimulus plan.  Would it be just what the economy needs or would it be too much and end up overheating the economy and hurting more than it helps?  It looks like we have our answer.  Jim Tankersley and Jeanna Smialek, over at the New York Times, write that Biden and The Fed are leaving 1970’s inflation fears behind. (New York Times)

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.

A small but influential group of economists are questioning this view.  Their argument is that Biden’s stimulus proposal actually, “outstrips the size of the hole the coronavirus has left in the economy. With so many dollars chasing a limited supply of goods and services, the argument goes, purchasing power could erode or the Fed might need to abruptly lift interest rates, which could send the economy back into a downturn.”Charles Evans, the president of the Federal Reserve Bank of Chicago, said earlier this month that $1.9 trillion in government spending would have the potential to help the Fed hit its inflation and job market goals faster.

Current leaders in Washington not only disagree with this thinking, they actually think some overheating might be a good thing.  Charles Evans, the president of the Federal Reserve Bank of Chicago, said earlier this month that, “$1.9 trillion in government spending would have the potential to help the Fed hit its inflation and job market goals faster.”