ECONOMIC EXPERTS: “DON’T PANIC” ABOUT INFLATION

While inflation hawks employ scare tactics to undermine the push for major public investment in the nation’s physical and human infrastructure, economic experts agree that inflation is not a major worry, and that, should it occur, the Federal Reserve has the tools to address the issue.

Here’s what they’re saying:

Chair of President Obama’s Council of Economic Advisers, Jason Furman: 

  • “Eventual higher interest rates from more expansionary fiscal policy are a plus not a minus […] Knowing the Fed is on top of its inflation mandate (which I think it is) allows fiscal policymakers to do more and take greater risks. That is a good thing because only fiscal policymakers can do things like child allowances and clean energy investments that serve broader goals.” [Twitter, 5/4/21]
Nobel Prize-Winning Economist Paul Krugman: 
  • “Pundits are panicking over popping prices. This was entirely predictable — and predicted: as the economy surged, bottlenecks and price blips were inevitable […] So, don’t panic. Yes, we might see overheating, and might need to tighten monetary policy down the road (even if Janet Yellen got in trouble for saying the totally obvious.) But we really shouldn’t get worked up about lumber prices etc” [Twitter, 5/5/21]
Here’s what more experts have to say about inflation risks and the tools to deal with it: 

David Beckworth, former Treasury Department Economist, and Ramesh Ponnuru, fellow at the American Enterprise Institute: Stop Worrying About Inflation

  • The evidence that high inflation is on the way is weak. It’s too weak, actually: An economy on the verge of a robust recovery would be showing more signs of rising inflation. Right now, inflation appears more likely to stay below its optimal level than above.”
  • “The danger to which the inflation hawks are pointing is mostly illusory. The one the hawks themselves pose is all too real.” [New York Times, 2/17/21]
Eric Winograd, Senior Economist for Fixed Income at Alliance Bernstein:
  • “For the Fed, the risk of tightening policy prematurely is much greater than the cost of tightening too late … The same is true on the fiscal side. If you do too little, we risk a very weak economy. You do too much, we get an overheated economy. Oh well. We have the tools to deal with that.” [Politico, 2/11/21]
Treasury Secretary and Former Federal Reserve Chair Janet Yellen:
  • “My predecessor has indicated that there’s a chance this will cause inflation to rise. That’s also a risk we have to consider. I spent many years studying inflation and worrying about inflation and I can tell you we have the tools to deal with that risk if it materializes. But we face a huge economic challenge here, tremendous suffering in the country, we’ve got to address that – that’s the biggest risk.” [CNN, 2/7/21]
Paul Krugman, Nobel Prize-Winning Economist:
  • There’s an easy answer if inflation should start to rise: the Federal Reserve can tighten monetary policy. I’ve seen suggestions that this won’t work — either that the Fed will lack the will to tighten or that it can’t tighten without causing a recession. But when was the last time the Fed was too hesitant about tightening? I think you have to go back to Arthur Burns in the 1970s; its bias has gone the other way ever since.” [New York Times, 2/7/21]
Federal Reserve Chair Jerome Powell:
  • If inflation were to move up in ways that are unwelcome, we have the tools for that, and we will use them. No one should doubt that.” [CNBC, 1/14/21]
  • “I’m much more worried about falling short of a complete recovery and losing people’s careers and lives that they built because they don’t get back to work in time.  I’m more concerned about…the damage that will do not just to their lives, but to the United States economy, to the productive capacity of the economy.  I’m more concerned about that than about the possibility which exists of higher inflation.” [White House Press Briefing Transcript, 2/5/21]
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