Whatever you may think of the outgoing administration, there are still some useful takeaways
A few years ago, one of my sisters decided we should all give new year resolutions to each other, instead of coming up with our own. The experiment was largely a disaster as almost everyone ended up offended. (What do you mean I need to exercise more?!) Nevertheless, I’m going to risk offence by offering President-elect Joe Biden some new year resolutions, based on things we learnt during the administration of Donald Trump.
Fiscal sobriety is overrated. With millions unemployed, a pandemic still raging and the US economy slowing again, the most important new year resolution is to embrace spending and not worry about budget deficits. Economists don’t think President Trump’s 2018 tax cut and spending programme accomplished much. But it did show big fiscal stimulus doesn’t have to be inflationary.
Here is the evidence. The US economy grew just over 2 per cent in 2017, and unemployment fell to 4.1 per cent, below the Federal Reserve’s full-employment estimate at the time. Worried about inflation, the Fed hiked interest rates three times that year. But then, in 2018, the economy got a $275bn tax cut-led spending boost.