Thursday , July 29 2021
Home / Project Syndicate / An Infrastructure Inoculation for America’s Recovery

An Infrastructure Inoculation for America’s Recovery

Summary:
In weighing the options for additional stimulus, President-elect Joe Biden’s trillion infrastructure investment plan has much to recommend it. If accompanied by a new independent commission to ensure that the money isn’t wasted on pork-barrel projects, it is a better approach than sending more checks to every household. BERKELEY – With the Democrats’ stunning sweep of Georgia’s two Senate run-off elections handing them control of both houses of Congress as of January 20, the idea of ,000 stimulus checks for every household is sure to be back on the agenda in the United States. But although targeted relief for the unemployed should unquestionably be a priority, it is not clear that ,000 checks for all would in

Topics:
Barry Eichengreen considers the following as important:

This could be interesting, too:

Tyler Cowen writes Wednesday assorted links

FT Alphaville writes Big tech: trees can grow to the sky

Tyler Cowen writes My excellent Conversation with Niall Ferguson

FT Alphaville writes Now is not the time for central bank digital currencies

In weighing the options for additional stimulus, President-elect Joe Biden’s $2 trillion infrastructure investment plan has much to recommend it. If accompanied by a new independent commission to ensure that the money isn’t wasted on pork-barrel projects, it is a better approach than sending more checks to every household.

BERKELEY – With the Democrats’ stunning sweep of Georgia’s two Senate run-off elections handing them control of both houses of Congress as of January 20, the idea of $2,000 stimulus checks for every household is sure to be back on the agenda in the United States. But although targeted relief for the unemployed should unquestionably be a priority, it is not clear that $2,000 checks for all would in fact help to sustain the US economic recovery.

One post-pandemic scenario is a vigorous demand-driven recovery as people gorge on restaurant meals and other pleasures they’ve missed for the past year. Many Americans have ample funds to finance a splurge. Personal savings rates soared following the disbursement of $1,200 checks last spring. Many recipients now expect to save their recent $600 relief payments, either because they have been spared the worst of the recession or because spending opportunities remain locked down.

So, when it’s safe to go out again, the spending floodgates will open, supercharging the recovery. The Fed has already promised to “look through” – that is, to disregard – any temporary inflation resulting from this euphoria.

But we shouldn’t dismiss the possibility of an alternative scenario in which consumers instead display continued restraint, causing last year’s high savings rates to persist. Prior to the COVID-19 crisis, some two-thirds of US households

Barry Eichengreen
Barry Eichengreen is Professor of Economics at the University of California, Berkeley; Pitt Professor of American History and Institutions at the University of Cambridge; and a former senior policy adviser at the International Monetary Fund.

Leave a Reply

Your email address will not be published. Required fields are marked *