Link

The Levy Institute’s Macro-Modeling Team — The Pandemic, The Stimulus, And The Future Prospects For The US Economy

Dimitri B. Papadimitriou, Michalis Nikiforos and Gennaro Zezza have a new report on prospects for the US economy.

They argue that while the US economy would enjoy a boom in the near term because of the large fiscal stimulus, the danger is that because of the large trade imbalance because of the different growth rates of the US and its trading partners implies that the continuation would require a large fiscal deficit or the private sector becoming a net borrower.

In my opinion, soon enough when the US economy starts approaching full employment, there will be shouts to cut the fiscal stance because as Michal Kalecki argued captains of industry don’t like full employment. And/or: continuous growth would require high fiscal deficits but as the public debt will continue to rise relative to gdp, politicians will get nervous.

The US government could try to improve net exports by increasing competitiveness of US firms but such things take time. A combination of trying to improve net exports by industrial policy, tariffs and eventually removing the system of free trade is the way forward. It won’t be easy as economists are attached to dogmas.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Note: If not opted-in, comments in moderation can be previewed only for a short while.

This site uses Akismet to reduce spam. Learn how your comment data is processed.