{"id":9374,"date":"2022-11-23T15:34:35","date_gmt":"2022-11-23T15:34:35","guid":{"rendered":"http:\/\/lonecandle.com\/?p=9374"},"modified":"2022-11-23T15:34:35","modified_gmt":"2022-11-23T15:34:35","slug":"is-the-stimulus-to-blame-for-high-inflation","status":"publish","type":"post","link":"https:\/\/lonecandle.com\/?p=9374","title":{"rendered":"Is the stimulus to blame for high inflation?"},"content":{"rendered":"\n

\n\n“The American Rescue Plan, intended to stimulate the economy from the effects of the pandemic, was a massive spending<\/a> package that passed in March 2021. The legislation included $1,400 checks for individuals, expansions to unemployment insurance and child tax credit benefits, and hundreds of billions in aid to state and local governments.
<\/p>\n\n\n\n

For months, economists have debated the American Rescue Plan\u2019s impact on inflation. While many economists agree that the stimulus law did worsen inflation by giving people more money to spend, they continue to disagree about the extent. The debate is, in part, about what else might be to blame in the United States and globally. Inflation started shooting up in early 2021 after the package passed and has remained stubbornly high since. But even without the stimulus, inflation would have increased. The coronavirus led to factory shutdowns around the world, shipping backlogs, and labor shortages<\/a>, all of which have strained supply chains and pushed prices higher.The disagreement essentially boils down to economists\u2019 views on how pandemic-related factors independent of the stimulus, such as a shift to working from home, have contributed to inflation and how unique inflation has been in the United States compared to other countries.”
…
“Increased housing costs have been a big driver of inflation \u2014 shelter is the largest component of the Consumer Price Index and makes up about 30 percent<\/a> of overall inflation as measured by the index. Dean Baker, a senior economist and co-founder of the liberal-leaning Center for Economic and Policy Research, argued that new research on housing inflation helped support the idea that price gains were mostly driven by a mass shift to remote work and not the stimulus package. As people shifted to remote work, housing prices went up, and those prices in turn pushed overall inflation higher.<\/p>\n\n\n\n

An analysis published by the Federal Reserve Bank of San Francisco<\/a> on September 26 examined the rapid rise in housing prices and whether remote work, or other factors like fiscal stimulus, led to the increase. The authors \u2014 Augustus Kmetz, John Mondragon, and Johannes Wieland \u2014 wrote that as more people started working remotely, they sought out additional space at home. That resulted in a spike in housing demand and helped lead to a surge in prices.<\/p>\n\n\n\n

The researchers estimated that remote work resulted in house prices rising by about 15 percent from November 2019 to November 2021, which accounts for more than 60 percent of the overall increase in house prices.<\/p>\n\n\n\n

\u201cIt means we can\u2019t blame the stimulus. Clearly that added to it,\u201d Baker said. \u201cBut the main story there is this big switch to working from home.\u201d”<\/p>\n\n\n\n

…<\/p>\n\n\n\n

“Holtz-Eakin said it was clear that the package significantly drove up inflation and pointed to research from the Federal Reserve Bank of San Francisco, which published an analysis<\/a> in March that found that \u201cfiscal support measures designed to counteract the severity of the pandemic\u2019s economic effect\u201d could have \u201ccontributed to about 3 percentage points of the rise in U.S. inflation through the end of 2021.\u201d<\/p>\n\n\n\n

The analysis \u2014 which was written by \u00d2scar Jord\u00e0, Celeste Liu, Fernanda Nechio, and Fabi\u00e1n Rivera-Reyes \u2014 found that the United States\u2019 \u201ccore\u201d inflation, which strips out volatile food and energy prices, rose more quickly in 2021 compared to the average rate of core inflation of other wealthy countries. Compared to the other countries \u2014 Canada, Denmark, Finland, France, Germany, Netherlands, Norway, Sweden, and the United Kingdom \u2014 the United States injected more fiscal stimulus into its economy.<\/p>\n\n\n\n

\u201cThe difference is really the stimulus in the US,\u201d Holtz-Eakin said.<\/p>\n\n\n\n

But Josh Bivens, the director of research at the left-leaning Economic Policy Institute, said that inflation has been ubiquitous \u201cacross every advanced economy\u201d since the pandemic began and he didn\u2019t believe the American Rescue Plan was a major contributor to inflation. An analysis<\/a> published in August by Bivens, Asha Banerjee, and Mariia Dzholos examined the United States\u2019 core inflation from December 2020 to May 2022 and compared it to core inflation in other Organization for Economic Cooperation and Development (OECD) countries. To calculate the rate of acceleration in each country, the researchers took the difference between the \u201cpost-pandemic\u201d core inflation and the \u201cpre-pandemic\u201d core inflation using data from 2018 and 2019.<\/p>\n\n\n\n

The researchers found that the acceleration in the United States\u2019 core inflation was \u201con the higher side\u201d but was \u201cfar from the top\u201d and not that far above the average for all other OECD countries. All but one OECD country saw an acceleration in core inflation, the researchers found. For example, Canada\u2019s core inflation grew at a slightly slower rate compared to the United States, but Portugal\u2019s sped up faster, according to the analysis.” <\/p>\n\n\n\n

…<\/p>\n\n\n\n

“Bivens also pointed to the Federal Reserve Bank of San Francisco\u2019s research on housing inflation and said that price gains in the United States were mostly driven by pandemic-related events that would have occurred without the stimulus \u2014 like supply chain disruptions and increased demand for housing. And although he said he believed the American Rescue Plan had inflationary impacts, the trade-off was necessary to stave off higher unemployment numbers.”<\/p>\n\n\n\n

https:\/\/www.vox.com\/policy-and-politics\/2022\/10\/17\/23401726\/inflation-stimulus-american-rescue-plan<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

“The American Rescue Plan, intended to stimulate the economy from the effects of the pandemic, was a massive spending package that passed in March 2021. The legislation included $1,400 checks for individuals, expansions to unemployment insurance and child tax credit benefits, and hundreds of billions in aid to state and local governments.<\/p>\n

For months, economists have debated the American Rescue Plan\u2019s impact on inflation. While many economists agree that the stimulus law did worsen inflation by giving people more money to spend, they continue to disagree about the extent. The debate is, in part, about what else might be to blame in the United States and globally. Inflation started shooting up in early 2021 after the package passed and has remained stubbornly high since. But even without the stimulus, inflation would have increased. The coronavirus led to factory shutdowns around the world, shipping backlogs, and labor shortages, all of which have strained supply chains and pushed prices higher.<\/p>\n

The disagreement essentially boils down to economists\u2019 views on how pandemic-related factors independent of the stimulus, such as a shift to working from home, have contributed to inflation and how unique inflation has been in the United States compared to other countries.”<\/p>\n

…<\/p>\n

“Increased housing costs have been a big driver of inflation \u2014 shelter is the largest component of the Consumer Price Index and makes up about 30 percent of overall inflation as measured by the index. Dean Baker, a senior economist and co-founder of the liberal-leaning Center for Economic and Policy Research, argued that new research on housing inflation helped support the idea that price gains were mostly driven by a mass shift to remote work and not the stimulus package. As people shifted to remote work, housing prices went up, and those prices in turn pushed overall inflation higher.
\nAn analysis published by the Federal Reserve Bank of San Francisco on September 26 examined the rapid rise in housing prices and whether remote work, or other factors like fiscal stimulus, led to the increase. The authors \u2014 Augustus Kmetz, John Mondragon, and Johannes Wieland \u2014 wrote that as more people started working remotely, they sought out additional space at home. That resulted in a spike in housing demand and helped lead to a surge in prices.<\/p>\n

The researchers estimated that remote work resulted in house prices rising by about 15 percent from November 2019 to November 2021, which accounts for more than 60 percent of the overall increase in house prices.<\/p>\n

\u201cIt means we can\u2019t blame the stimulus. Clearly that added to it,\u201d Baker said. \u201cBut the main story there is this big switch to working from home.\u201d”<\/p>\n

…<\/p>\n

“Holtz-Eakin said it was clear that the package significantly drove up inflation and pointed to research from the Federal Reserve Bank of San Francisco, which published an analysis in March that found that \u201cfiscal support measures designed to counteract the severity of the pandemic\u2019s economic effect\u201d could have \u201ccontributed to about 3 percentage points of the rise in U.S. inflation through the end of 2021.\u201d<\/p>\n

The analysis \u2014 which was written by \u00d2scar Jord\u00e0, Celeste Liu, Fernanda Nechio, and Fabi\u00e1n Rivera-Reyes \u2014 found that the United States\u2019 \u201ccore\u201d inflation, which strips out volatile food and energy prices, rose more quickly in 2021 compared to the average rate of core inflation of other wealthy countries. Compared to the other countries \u2014 Canada, Denmark, Finland, France, Germany, Netherlands, Norway, Sweden, and the United Kingdom \u2014 the United States injected more fiscal stimulus into its economy.<\/p>\n

\u201cThe difference is really the stimulus in the US,\u201d Holtz-Eakin said.<\/p>\n

But Josh Bivens, the director of research at the left-leaning Economic Policy Institute, said that inflation has been ubiquitous \u201cacross every advanced economy\u201d since the pandemic began and he didn\u2019t believe the American Rescue Plan was a major contributor to inflation. An analysis published in August by Bivens, Asha Banerjee, and Mariia Dzholos examined the United States\u2019 core inflation from December 2020 to May 2022 and compared it to core inflation in other Organization for Economic Cooperation and Development (OECD) countries. To calculate the rate of acceleration in each country, the researchers took the difference between the \u201cpost-pandemic\u201d core inflation and the \u201cpre-pandemic\u201d core inflation using data from 2018 and 2019.<\/p>\n

The researchers found that the acceleration in the United States\u2019 core inflation was \u201con the higher side\u201d but was \u201cfar from the top\u201d and not that far above the average for all other OECD countries. All but one OECD country saw an acceleration in core inflation, the researchers found. For example, Canada\u2019s core inflation grew at a slightly slower rate compared to the United States, but Portugal\u2019s sped up faster, according to the analysis.” <\/p>\n

…<\/p>\n

“Bivens also pointed to the Federal Reserve Bank of San Francisco\u2019s research on housing inflation and said that price gains in the United States were mostly driven by pandemic-related events that would have occurred without the stimulus \u2014 like supply chain disruptions and increased demand for housing. And although he said he believed the American Rescue Plan had inflationary impacts, the trade-off was necessary to stave off higher unemployment numbers.”<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[217,165,1469,1193,1316,780,624],"class_list":["post-9374","post","type-post","status-publish","format-standard","hentry","category-article-share","tag-economics","tag-economy","tag-government-intervention","tag-government-spending","tag-inflation","tag-joe-biden","tag-stimulus"],"_links":{"self":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/9374","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=9374"}],"version-history":[{"count":1,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/9374\/revisions"}],"predecessor-version":[{"id":9375,"href":"https:\/\/lonecandle.com\/index.php?rest_route=\/wp\/v2\/posts\/9374\/revisions\/9375"}],"wp:attachment":[{"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=9374"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=9374"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lonecandle.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=9374"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}