Politicians take too much credit for good news
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Over Labor Day weekend, Inside Sources syndicated an op-ed of mine arguing that politicians do not deserve credit for the economy’s post-COVID recovery. They slowed it down with bad monetary policy and massive spending bills that had little to do with pandemic relief:
The economy is mostly healthy now because the pre-COVID economy was healthy. [Unlike] in previous downturns, there was no savings and loan scandal, no housing bubble, and no financial crisis. A strong economy closed down, then opened back up. Politicians shouldn’t take credit for that.
If anything, the re-opening was needlessly complex because Washington overreacted. An iron law of economics is that when you print a bunch of money, you will get inflation. In the first two years of the pandemic, the Federal Reserve grew its balance sheet by nearly $5 trillion, more than doubling in size. That unprecedented monetary stimulus is the leading cause of the inflation we’re still dealing with.
The Fed’s monetary overkill doesn’t let Biden or Congress off the hook. One could argue some new spending was necessary for relief payments and vaccines. But most of the trillions of dollars spent under the CARES Act, the Infrastructure Investment and Jobs Act, and the CHIPS Act had little to do with the pandemic. All this spending made the Fed’s job harder, as it more or less has to help finance the political branches’ deficit spending.
Read the whole piece here. For a more restrained approach to policy see CEI’s Agenda for Congress.