Jason Furman

And by the way, many of them had less inflation when you sort of adjust and think about it correctly than the United States did.

So there's two separate issues.

One is we have a large budget deficit right now.

In fact, larger than any year except World War II, the financial crisis and COVID.

And that's in a relatively normal, placid time.

So that's a really big source of concern in terms of what it means for economic growth risks in our economic future.

In terms of inflation, it's not the level of the budget deficit, it's how quickly it's changing.

And so when we added so much to the debt so quickly in the wake of COVID, absolutely that played a role.

And the way to think about it is households were in many cases seeing their income go up 30, 40, 50% from what it was prior to COVID.

If you went out and spent all that money, the economy couldn't make 30, 40, 50% more than it was making before COVID.

And so, instead of output going up a lot, prices are the variable that can adjust and go up a lot.

So, I think the spending was the big part of which checks, support for states, and forgivable loans to small businesses, all three of those played a role.

And the Fed was probably secondary, but didn't help.

In part, it's related to what we're just talking about.

When you have large deficits in debt, it's really tempting to lean on the Fed, tell them cut interest rates.

By the way, if we get a bout of inflation, that's OK, too, because it helps us repay our debt.

It makes it easier to repay the debt.

And you've seen that in the past in a lot of countries around the world, even in the United States in the wake of World War II.

If we did that now and the Fed made its goal of making it easier to repay the debt, it would have to sacrifice its mandates of maximum employment and price stability.

We'd end up with a lot of inflation and big problems.