{"id":7264,"date":"2022-02-17T18:39:01","date_gmt":"2022-02-17T18:39:01","guid":{"rendered":"http:\/\/lonecandle.com\/?p=7264"},"modified":"2022-02-17T18:39:01","modified_gmt":"2022-02-17T18:39:01","slug":"what-democrats-and-republicans-get-wrong-about-inflation","status":"publish","type":"post","link":"https:\/\/lonecandle.com\/?p=7264","title":{"rendered":"What Democrats And Republicans Get Wrong About Inflation"},"content":{"rendered":"\n

\n\n“many economists<\/a> say that the foundering supply chain<\/a> has played a heavy hand in driving up prices<\/a>“
…
“it\u2019s become clear to many economists that American inflation isn\u2019t just<\/em> a supply chain issue: Our economic response \u2014 namely, the trillions of dollars of COVID-19 stimulus paid out over the last 24 months \u2014 appears to be a meaningful differentiator<\/a>.
A good way to tease this out is to look at Europe, which has faced similar supply chain issues and an even worse oil shock, as it is more dependent on foreign oil than the U.S.<\/a> And yet, European countries have experienced lower inflation<\/a>, perhaps due in part to their smaller government response<\/a>.”  
…
“\u201cIf you look compared to Europe, in the United States goods consumption is higher, and services consumption is higher than what it is [in Europe].\u201d
One reason for that higher consumption is government spending. In 2020, a divided Congress under former President Donald Trump passed two separate pieces of legislation \u2014 first the $2 trillion CARES Act<\/a> in March, which doled out<\/a> $1,200 checks to most single adults and even more to families, then a $900 billion package in December<\/a> that, among other aid, issued $600 targeted checks. But then in March 2021, Democrats passed another round of government stimulus in a $1.9 trillion relief package \u2014 including $1,400 direct payments to individual Americans \u2014 which some experts warned at the time might cause inflation<\/a>.”
…
“Furman stressed to me that inflation likely would have been high even without a COVID-19 relief bill, however, because of a reopening economy and base effect distortions<\/a>. Moreover, rising gas prices \u2014 one of the most tangible ways in which Americans process inflation \u2014 likely have nothing to do with the American Rescue Plan and much more to do with the dynamics of global oil. There is at least some evidence, though, that government spending has caused inflation, beyond the explanation that it\u2019s merely been a supply chain issue.”  
…
“not all government spending has the same effect on inflation. In fact, historically government spending hasn\u2019t usually led to inflation. A 2015 paper<\/a> in the European Economic Review found, for example, that the effect of government spending on inflation post-World War II was \u201cnot statistically different from zero<\/a>.\u201d But Bill Dupor<\/a>, a co-author of that study and vice president of research at the Federal Reserve Bank of St. Louis, told me that the size of the intervention matters \u2014 and that could help explain why government spending today has spurred inflation but hadn\u2019t in recent memory.”  <\/p>\n\n\n\n

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What Democrats And Republicans Get Wrong About Inflation<\/a><\/blockquote>