“One session was entitled: Where is the economy headed? The panellists in this session expressed ‘uncertainty’ about the direction of the US economy over the next few years because of the ‘jolts’ from the COVID pandemic and its impact on commercial real estate (home working), possible banking crises and ‘geopolitical instabilities’. “These instabilities, in particular, make the path forward less predictable and less resilient to systemic shock.” said Janice Eberly of Northwestern University.
“What was surprising is that the panelists seemed most worried about the size of the public debt and fiscal deficits weakening the US economy. It seems that the mainstream is still obsessed with reducing the size of the public sector and spending, rather than addressing any fault lines in the dominant capitalist sector of the economy. James Hines of the University of Michigan forecast that by 2030 the cost of servicing the public debt (interest and bond repayments) would exceed all tax revenues and then there would have be cuts in public spending – even defence spending (shock!). And this was the real obstacle to growth in the US economy.
“The comforting thought, however, Hines said was that the US “does capitalism” better than any other country, with strong entrepreneurial companies and well organised financial and public institutions to ensure that US capitalism works. “Most of the things that are going to be helpful are going to come from free markets—lots of trade, lots of investment,” said Hines. What about the high and rising inequality of income and wealth in the US?, a questioner asked. Yes, this was concerning was the reply, and economists needed to consider the problem carefully…. but no answer was offered.”
On inflation, economists continue to argue over causes: Supply chain kinks? Excess demand? Fiscal stimulus? Too much money pumped into the economy? While most point at their favorite reason, it’s likely all these factors are inter-acting.