Gaps, Traps and Stimulus Plans
An improving economic outlook is no reason to skimp on Covid relief.
A stimulating discussion.
Photographer: Pool/Getty Images North AmericaJust when Washington’s politicians seem ready to move forward with a Covid relief bill, some of its economists are voicing doubts about whether further stimulus is necessary. In this case, the politicians have the better argument.
It’s not just the latest Congressional Budget Office report, which projects a return to the pre-pandemic economy by mid-2021 based solely on the stimulus that has already passed. An analysis by the Committee for a Responsible Federal Budget looks at the so-called output gap, the difference between actual gross domestic product and the economy’s maximum potential. For 2021, it says, the gap could be closed with a mere $250 billion in stimulus, and $500 billion would be enough to shore up the economy through 2023.