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What economists don’t know about the American economy

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What economists don’t know about the American economy

Those who think the US is spending recklessly can’t claim to be sure

One of the biggest questions hanging over the US economy right now is whether its government is spending too much money. Some economists are warning it’s time to hit the brakes. President Joe Biden’s $1.9 trillion pandemic relief package came on top of $3.1 trillion in similar outlays in 2020, and now he is planning at least two new big spending initiatives for infrastructure and job creation. Some economists worry it’s too much and that higher taxes won’t be able to cover all the new spending. If that’s the case, and the Federal Reserve chooses to keep interest rates low, the result could be accelerating inflation.

But remember that macroeconomics is a hard subject, and even experts know only a little bit about how the economy works. So while we should pay attention to economists’ intuitions on things like government spending, inflation and unemployment, we should also keep in mind that their pronouncements are far from the final word.

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