Home News Leading Liberal Economist Sounds Alarm Over Biden’s $1.9 Trillion Covid Bill

Leading Liberal Economist Sounds Alarm Over Biden’s $1.9 Trillion Covid Bill



One of the world’s leading liberal economists dealt Joe Biden a blow in recent days, warning that the president’s $1.9 trillion covid relief legislation could ignite an inflationary conflagration.

Olivier Blanchard, the former chief economist of the International Monetary Fund and perhaps the most cited economist in the world, spelled out his case against the Biden bill in a series of tweets on Saturday.

Blanchard’s argument is that the size of the stimulus injected into the economy would be too large, especially when added to the measures taken last year. The additional spending power created by the additional $1.9 trillion budget deficit would drive up prices and force the Federal Reserve to hike interest rates.

Let’s look at the numbers. Size does matter and can be assessed.

If the economy had continued on its pre-covid trend, it would be about 900 billion dollars larger. This suggests an output gap of less than 900 billion as some sectors will not operate at full speed for some time.

— Olivier Blanchard (@ojblanchard1) February 6, 2021

If this increase in demand could be accommodated, it would lead to a level of output at 14% above potential. It would take the unemployment rate very close to zero.

This would not be overheating; it would be starting a fire.

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