Speaking at the National Economists Club, PIIE senior fellow Joseph E. Gagnon invoked the economy of the 1950s to reassure economists concerned about overheating as a result of President Joseph R. Biden Jr.’s $1.9 trillion COVID-19 relief package. A burst of government spending on the Korean War led to a large but temporary surge in inflation in 1951 but left no lasting economic damage. Providing the Federal Reserve commits to curbing long-term inflation, Gagnon argues any inflationary episode inflicted by short-term spending to fight the COVID-19 pandemic and restart the economy should be temporary.
Video posted with permission of the National Economists Club. Event details are available here.