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Opinion
Tyler Cowen

If Biden Goes Big Now, He May Have to Go Small Later

Yes, a lot of Covid spending is necessary, but the basic laws of economics still hold.

Does the stimulus need to be this big?

Does the stimulus need to be this big?

Photographer:  Ken Cedeno/CNP/Bloomberg

Although President Joe Biden’s $1.9 trillion aid and stimulus package now appears likely to pass, the current state of the economy suggests that a much smaller program would suffice. Vaccines are on the way, many state budgets are in OK shape, household balance sheets are robust including many for the poor, real estate is booming, and retail sales are above where they were a year ago.

Make no mistake: A faster and better public health response is imperative, both to save lives and to drive a recovery. It is not necessary, however, to “juice the economy” at the scale being proposed. Both Lawrence H. Summers and Olivier Blanchard, two of the best Keynesian macroeconomists in the world, have said so. But in the current debate, they are not being refuted so much as dismissed because they are not left-wing enough.