Joseph Stiglitz, one of the world's most renowned economists, thinks his colleague, former Treasury Secretary Lawrence Summers, is overreacting about the potential risks of President Biden's $1.9 trillion COVID-19 stimulus plan.
In an op-ed published by The Washington Post in February, Summers wrote that the relief package, which was signed into law earlier this month, was "admirably ambitious," but warned it could lead to "inflationary pressures of a kind we have not seen in a generation." Summers later doubled down on his position during a conversation with another famous economist, Paul Krugman, arguing the American Rescue Plan goes "way beyond what's necessary" to help victims of the pandemic.
But Stiglitz, a proponent of the stimulus, told Axios that Summers "didn't really think through what he was saying" about inflation. That's because, in Stiglitz's view, "we've been in a long period where we've been facing [a] lack of aggregate demand at the national and global level." Therefore, there's actually "an awful lot of scope to increase demand," allowing people to spend their extra money from the stimulus without overheating the economy, Stiglitz argued. He added that he finds Summers' fears ironic given that he has talked about "secular stagnation" himself, implying increased demand would be welcome. Read more at Axios.