As the New York Times Neil Irwin explains, these risks aren't certain to materialize-inflation has been subdued for years, the bond market isn't freaking out, and Powell has said he's willing to tolerate a near‐term spike in prices without raising rates-but the truth is that nobody knows what will happen, and it's important to understand the tradeoffs and very real potential downside risks.
First, there's the risk that a gargantuan, poorly targeted, partisan package now will imperil future federal relief efforts regardless of the conditions on the ground later this year.
Ramming through another $1.9 trillion right now could mean that federal relief is absent in, say, fall 2021 even though certain localities, companies, or workers are still reeling-and previous relief didn't fully compensate them.
As Miron explains in a new research paper, the United States' fiscal situation is unsustainable in the long term not because of temporary COVID-19 spending but because of runaway entitlement spending.
The additional deficit spending could be a drag on future economic growth and long‐term fiscal pressure would arise to the extent that the American Rescue Plan's "Temporary" spending ends up being not‐so‐temporary at all.
There's the final risk: that much of this "Temporary" spending becomes permanent, thus leading to a long‐term expansion of size and scope of the federal government.
Once a certain government program and/or spending level is established, political inertia makes repeal or reform extremely difficult, as new constituencies are established and any "Cuts"-no matter the size, effect or historical context-are deemed heartless, draconian Social Darwinism.
https://www.cato.org/commentary/were-paying-19-trillion-what
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