During an interview with Bloomberg on Friday, White House Council of Economic Advisers member Heather Boushey argued that fiscal policy isn’t too loose because “we have seen those ongoing declines in the inflation rate” and a soft landing is “where we are right now.” She also stated that with the spending plans put into place by the Biden administration, “the money hasn’t started flowing yet, in large part.”
Co-host Guy Johnson asked, [relevant exchange begins around 3:45] “We have had 500 basis points of hikes on the monetary side and we’ve still got an unemployment rate of 3.4% and it’s falling. That, as an economist, must surprise you a little bit and it must make you wonder whether the fiscal side of the equation is therefore still too accommodative. Is there any evidence that, given the rate rises that we’ve seen, that that does imply the fiscal is too loose, too accommodative?”
Boushey answered, “Well, here’s the thing, we have seen those ongoing declines in the inflation rate. It came in last month at 5%, which was down from where it had been last summer at right over 9%. So, that is certainly a sign of slowing on the inflation side, although, of course, prices remain too high. What we also have wanted to see was continued strength in the job market. We want to see those jobs available for families all across the country, and one of the key pieces in that is seeing people come back into the labor force. We actually saw this month that the share of women in their prime working ages between 25 and 54, the share of them in the labor force hit an all-time series high going back to 1948. So, that, I think, is indicative of the strength of this recovery, the fact that, if you offer good jobs to people, they’ll come back out and get back to work. So, it feels like that soft landing that we were looking for, that’s where we are right now.”
Later, after spending plans by the administration came up and Boushey argued that the spending plans will help the supply side of the economy, Johnson said, “[Y]ou look at the data right now, you look at this unemployment rate, you look at where inflation is right now, and you have to question whether this is an economy that needs the kind of stimulus that you’re talking about.”
Boushey responded, “So, I would just stress that that isn’t stimulus. And if you look at a figure of when that money goes out the door, it’s over the next decade. It is not clumped this year and next year. It is spread out over time. And in fact, the money hasn’t started flowing yet, in large part.”
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