You’re welcome. The Economist, in my opinion, has some minor biases but is usually very reasonable. The nuance I would add is that the effect of any fiscal expansion—and I’d be more inclined to emphasize expansion rather than the deficit per se—depends on many factors, not least of which is the concurrent output gap. M.Y. summarizes that point well.
To be fair, following a decade of persistently below-target inflation in the U.S., and to an even greater degree in other major developed economies, inflation wasn’t the top concern on anybody’s mind! Also, speaking of other countries, the other big consideration is that while such fiscal expansion likely drove U.S. prices higher than they would’ve gone otherwise, high inflation has in fact been a fairly global issue since it began in 2021.
I will add that I found this type of analysis for why inflation was higher in the US persuasive. For example, this study from 2022 by the Federal Reserve Bank of San Francisco found that likely 3 percentage points of the higher inflation (basically all of it at the time) in the US compared to other rich countries was due to the stimulus in the US. But yes, I agree that the history of low inflation (and I believe lower stimulus than was appropriate during The Great Recession) made this a reasonable mistake to make.
I should note that the purpose of my post wasn’t to make a point about the pros and cons of different policies. I just wanted to point out that the personal experiences of voters were probably pretty different than most of us were thinking. I feel like I should have put more thought into making that clearer. I’ve been enjoying our conversation though!
You’re welcome. The Economist, in my opinion, has some minor biases but is usually very reasonable. The nuance I would add is that the effect of any fiscal expansion—and I’d be more inclined to emphasize expansion rather than the deficit per se—depends on many factors, not least of which is the concurrent output gap. M.Y. summarizes that point well.
To be fair, following a decade of persistently below-target inflation in the U.S., and to an even greater degree in other major developed economies, inflation wasn’t the top concern on anybody’s mind! Also, speaking of other countries, the other big consideration is that while such fiscal expansion likely drove U.S. prices higher than they would’ve gone otherwise, high inflation has in fact been a fairly global issue since it began in 2021.
Thanks for sharing your expertise.
I will add that I found this type of analysis for why inflation was higher in the US persuasive. For example, this study from 2022 by the Federal Reserve Bank of San Francisco found that likely 3 percentage points of the higher inflation (basically all of it at the time) in the US compared to other rich countries was due to the stimulus in the US. But yes, I agree that the history of low inflation (and I believe lower stimulus than was appropriate during The Great Recession) made this a reasonable mistake to make.
I should note that the purpose of my post wasn’t to make a point about the pros and cons of different policies. I just wanted to point out that the personal experiences of voters were probably pretty different than most of us were thinking. I feel like I should have put more thought into making that clearer. I’ve been enjoying our conversation though!