Greg Ip Profile picture
7 Apr, 5 tweets, 2 min read
Bidenomics seeks to lower the curtain on neoliberalism. This column explains key differences between the old and new canon. E.g. Old: scarcity dominates, demand > supply. New: slack dominates, supply > demand...…
2. Old: Don't let fiscal policy push unemployment too low, or inflation will rise. New: unemployment has always been too high. Inflation is a remote risk, and less costly than persistent unemployment.
3. Old: Savings are scarce so deficits crowd out private investment. New: Savings are plentiful so deficits aren't harmful. 4. Old: Transfers should be targeted. New: Transfers should be universal. 5. Old: Incentives matter a lot. New: not really...
Bidenomics draws on evidence that debts, inflation, incentives don't matter as much as we once thought. But in practice seems to have no limiting principle, e.g. if $3T stimulus ok, why not $6T? In practice, it depends critically on Fed keeping rates @ zero.
Addendum: In researching this column I read some of @JWMason1's work and listened to an interview with him on a podcast and found it head-clearing. Recommended.

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More from @greg_ip

8 Apr
1/ A thread. Underlying the differences between neoliberalism and Bidenomics that I wrote about this week… is a different weighting applied to macroeconomic and microeconomic policy...
2/ If you accept the neoliberal default that macro can’t help when all capital and labor are employed, then microeconomic policy must be designed to use those inputs as efficiently as possible. But Bidenomics assumes we're almost always below potential …
and thus it’s okay to pursue microeconomically “inefficient” channels to raise demand (universal transfers, UI bonuses, high minimum wages, etc) because we are still going to end up with higher employment and incomes...
Read 8 tweets
6 Feb
1/ @AngelUbide @Austan_Goolsbee It's because this is not a standard recession that "stimulus" debate is miscalibrated. The GDP shortfall today is overwhelmingly caused not by lack of demand but supply constraints: people who can't/won't work/consume because of the virus ...
2/ ... so fiscal focus must be first, getting the virus under control, here & abroad. You really can't spend too much there: if we fail at this, GDP never recovers, no matter how many checks we write ....
3/ second, relief for those who have lost income because of virus, both for pure welfare reasons & to sustain demand. Enhanced UI, other targeted relief, does that. With virus suppressed demand recovers endogenously: recall Goldman, Morgan see 7% GDP with just $1T stimulus ...
Read 4 tweets
22 Jan
1/ China beat the U.S. in 2020 because its authoritarian, centralized system better met the challenge of Covid and economic conflict than the U.S.' pluralistic, decentralized system. Will China keep winning? A thread ...…
2/ In 2019 experts ranked U.S. #1 in pandemic preparedness, China #51. Covid outcomes were roughly the exact opposite. China mobilized resources and subordinated individual to collective rights in ways the U.S. could not, or would not ...
3/ On the tech front, official China & private cos redoubled efforts to develop a domestic semiconductor base while in U.S. Cisco rebuffed plea to compete with Huawei & Intel moved to outsource chipmaking ...
Read 7 tweets
20 Jan
1/ The S&P rose 14% between election day and inauguration, the strongest transition rally on record (H/T @WSJ market data group). It rose 6% during Trump's transition, which leads me to reconsider ...
2/ .. importance of taxes (& regulation) in market returns. A lot of Trump rally, I thought, was due to lower expected corporate rate. Now, corporate rate is expected to be flat to higher (since D's won the GA senate) but market up even more ... so this is risk-on and ...
3/ shows that macro outlook (rates + fiscal + growth & of course, vaccines) is way more important than micro outlook for rates, regulation. (S&P transition return below)
Read 5 tweets
20 Dec 20
1/ Sen. @SenToomey's office wanted to curb Fed emergency lending to “preserve Fed independence and prevent Democrats from hijacking these programs for political and social policy purposes.” Yet Toomey also voted to confirm Judy Shelton to the Fed ...…
2/ ... who called for Fed monetary policy to support Trump's tax, trade and regulatory agenda, & has down played Fed's independence, saying Fed should "pursue a more coordinated relationship with both Congress and the president."… ...
3/ Toomey has been consistent on some issues e.g. opposing Trump on trade, but on Fed, he seems much less worried about central bank independence under a Republican than a Democratic president.
Read 4 tweets
24 Aug 20
1/ Lockdowns were a blunt & indiscriminate tool that slowed infections, but with no clear strategy for what came afterwards. We know enough now about how to bring down infections at a much lower cost to the economy. My latest.
2/ We had never used lockdowns before, not even during the 1918 flu. Pre-Covid, they were seen as too draconian and difficult to enforce and thus weren't part of the epidemiological toolkit.
3/ The U.S. missed its chance to emulate HK, Taiwan & SK using testing, tracing & quarantine to stop the pandemic without Covid. But nor did it make a clear choice between simply flattening the curve and allowing infections to continue, as Sweden did ....
Read 9 tweets

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