Joe Biden’s stimulus proposal “is a big package,” the Boston Fed’s Eric Rosengren said Friday. “But I think it’s appropriate.”
I’d venture the nearly 10 million people who had a job this time last year but don’t have one now probably agree. “The economy is in a lull, we’ve had a series of pretty weak data,” Rosengren went on to say, during remarks to CNBC.
This is a good time to step back and recall that Fed officials spent the better part of the last six months imploring lawmakers to deliver more fiscal stimulus. Long story short, the FOMC wasn’t particularly keen on the prospect of spending the next five years trying to rescue the world’s largest economy without a sufficiently robust and sustainable fiscal impulse.
Larry Summers, speaking to Bloomberg Friday, said Biden’s plan will overheat the economy.
“We’re going to have to watch this very carefully, and I think the conventional wisdom is underestimating the risks of hitting capacity,” Summers, who Bloomberg now identifies as a “paid contributor,” remarked.
Larry found himself on the receiving end of criticism late last month, when he derided more stimulus checks, citing similar concerns about “overheating.”
If it seems ludicrous (or at least potentially spurious) to you that anyone would suggest that an economy which is still 10 million jobs short of pre-recession levels and still spitting out weekly claims prints close to 1 million, might soon “overheat,” you’re not alone.
Of course, if you’re with Summers on the notion that direct payments aren’t a good idea or that they should be more narrowly construed, you’re not alone there either.
Bloomberg has a habit of accidentally employing dry humor, and their Friday piece on Summers was no exception. “Summers didn’t elaborate on what the overheating would look like,” Julia Fanzeres wrote.
That’s probably because it’s difficult to picture right now. Does the figure (below) look “hot” to you?
“We need to do more to support the economy,” Rosengren went on to tell CNBC.
For his part, Neel Kashkari struck familiar chords — for Neel, I mean.
“The end of the pandemic is further away than maybe we thought it was,” he said, during a virtual chat. He fretted over the sluggish pace of vaccine rollout and also a reluctance on the part of some Americans to get vaccinated. In his estimation, Kashkari said the pandemic is “probably going to be all of 2021.”
“Global vaccine rollout thus far [is] below expectations,” BofA’s Michael Hartnett wrote Thursday, in the latest edition of the bank’s popular “Flow Show” series, noting that vaccinations are “significantly behind” the bank’s projections.
Documenting the ongoing struggle, The New York Times cited “logistical confusion, shortages of doses, unequal distribution and bureaucratic hurdles” as factors “that have slowed the process of getting shots into people’s arms.”
The CDC warned Friday that the more contagious UK variant could become dominant in the US. “As of January 13, 2021, approximately 76 cases of B.1.1.7 have been detected in 10 U.S states,” the CDC said, adding that,
Multiple lines of evidence indicate that B.1.1.7 is more efficiently transmitted than are other SARS CoV-2 variants (1—3). The modeled trajectory of this variant in the U.S. exhibits rapid growth in early 2021, becoming the predominant variant in March. Increased SARS-CoV-2 transmission might threaten strained health care resources, require extended and more rigorous implementation of public health strategies (4), and increase the percentage of population immunity required for pandemic control.
Meanwhile, Pfizer is reducing vaccine deliveries to Europe due to upgrades necessary to boost production capacity. Those upgrades “presuppose adaptation of facilities and processes at the factory which requires new quality tests and approvals from the authorities,” Line Fedders, a spokeswoman, told the AP. “As a consequence, fewer doses will be available for European countries at the end of January and the beginning of February.”
Oh, and the UK is closing all travel corridors starting Monday in order to “protect against the risk of as yet unidentified new [COVID] strains,” Boris Johnson explained. “It comes as a ban on travelers from South America and Portugal came into force on Friday over concerns about a new variant identified in Brazil,” the BBC noted.
This is the backdrop against which some folks believe more fiscal stimulus risks “overheating” economies.
And who knows. They may be right. “Overheat” has no set definition, after all. Moreover, the pandemic does have an inflationary side, most notably via supply chain disruptions.
Still, it’s hard to escape the notion that the economic damage will linger and that we’re surely closer to double-dip recessions across western economies than we are to any broad-based “overheating.”
“I don’t see much risk of inflation shooting way above 2%,” Kashkari mused. The US labor market is “still as bad as the worst job market in the financial crisis,” he added.