As time goes on, the downsides of America’s supersized stimulus are becoming more apparent
THE FRISSON of relief among some of America’s most outspoken left-leaning economists is unmistakable. Whenever other countries report high inflation figures, they seize on it as evidence thatis part of a global trend. “I hate to ruin the victory lap of all the people boasting that Biden’s Recovery Act would be inflationary, but the UK also had a big jump in inflation, with no big stimulus,” tweeted Dean Baker of the Centre for Economic and Policy Research, a think-tank, on November 17th.
The case that this is at least partially homemade points to America’s unusually forceful pro-growth policies throughout the pandemic. These started with the stimulus cheques that President Donald Trump proudly signed and grew even more generous with Mr Biden’s. Over the course of 2020 and 2021 America’s fiscal deficit is on track to average about 14% of GDP, according to projections from the Congressional Budget Office. As with inflation, that is higher than in any other G7 country.
Indeed, buoyant American demand may well have exacerbated global shortages and spilled over into higher inflation elsewhere. Consider maritime shipments. Port throughput in America was 14% higher in the second quarter of 2021 than in 2019. Other parts of the world have been more subdued: throughput in Europe was 1% lower. But shipping rates everywhere have soared as capacity has been diverted to transpacific trade.
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