$1.9T COVID stimulus ‘exactly the amount’ needed to achieve full employment: Moody's economist
This is the time for ‘aggressive’ fiscal support, Moody's Analytics chief economist Mark Zandi said
Moody's Analytics chief economist Mark Zandi argued that President Biden's $1.9 trillion stimulus bill is "exactly the amount of money you'd want to spend to get the economy back to full employment in a short period of time," during an appearance on FOX Business’ “Mornings with Maria.”
US SPENDING ON COVID-19 RELIEF POISED TO HIT $6T WITH PASSAGE OF BIDEN STIMULUS BILL
MARK ZANDI: "I think the economy is set to take off here. It's going to be a rip-roaring year with the pandemic winding down. We've got $1.9 trillion in fiscal support coming. And we have a lot of pent-up demand in higher-income households with a lot of cash that they've saved up during the pandemic. So you bring all that together, that's a lot of juice. So we're going to see a lot of jobs and much lower unemployment by this time next year. So it's going to be a very strong economy.
I think this is exactly the amount of money you'd want to spend to get the economy back to full employment in a short period of time. And if you do the arithmetic and everything roughly sticks to the script on the pandemic, this economy will be back to full employment 18, 24 months from now. In a time, when you have very high unemployment, when short-term interest rates are at zero, this is the time to be very aggressive in providing that fiscal support. The Federal Reserve has got its foot flat on the accelerator. That's the exact right thing to do.
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Inflation is going to accelerate, but I view that as a feature, not a bug. I mean, inflation has been undesirably low for 20, 25 years. The Fed and every central bank on the planet has been working overtime to try to get inflation up and to this point, without any success. And still today, inflation is well below target. [Yesterday we got] the core CPI – [it's] 1.3% percent year-over-year. That's just about a point below what you want. So we want more inflation now. Can at some point down the road, we get above some things that people feel comfortable with, you know, well above the Fed's target? Possibly. But I think that's a very outside risk.
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I'd say bring it on. You know, we're really putting the cart before the horse here. Let's get back to full employment. Let's get inflation back at least close to the Fed's target. And then if we're above target, we know how to get it back down again."