Big Government Is the Answer to America's Supply Problems
Tax cuts and deregulation are remedies of a bygone age; the U.S. needs to act more directly to expand production.
The government needs to do more to help companies make more stuff.
Source: Bloomberg
In the wake of the pandemic, Americans are rediscovering the importance of the economy’s supply side. But this won’t be a rerun of the 1980 — we’re learning that there’s a lot more to bolstering supply than tax cuts and deregulation.
Economists, as most people know, tend to think of the world in terms of supply and demand. The Great Recession taught us to remember the importance of aggregate demand — quantitative easing and financial bailouts helped cushion the blow, and more fiscal stimulus back then would have set us on the road to recovery even sooner. But the Covid-19 pandemic is very different. Supply chain disruptions and a labor shortage are reminding us that not all economic problems are due to a lack of demand. Inflation is persisting at high levels, even as the job recovery has been sluggish.