If BBB doesn’t become law, real GDP growth in 2022 will be lower by 0.5% and reaching full-employment next year will prove elusive. Fallout will be quick as families w/ children will lose a tax break. Hard to see the Fed hiking rates 3 times next yr, as investors now anticipate.
Without BBB, the economic recovery will be vulnerable to stalling out if we suffer another serious wave of the pandemic; an increasingly likely scenario with Omicron spreading rapidly. Detractors of BBB worry about inflation, but without it, the worry is more likely to be growth.
There is still hope #BBB in some form will become law, but if so, it will surely be a shadow of what was being negotiated. What a shame. It puts the economic recovery at some risk in the near-term and will diminish the economy longer-run. And what about climate change?

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More from @Markzandi

10 Dec
November CPI inflation was predictably ugly, perhaps a bit less ugly than feared. Inflation over the past year has accelerated across most everything, but the biggest culprits have been surging cost of gasoline, home heating and vehicles.
But November will be the peak in inflation. Gasoline and home heating costs have fallen sharply in recent weeks, and with supply chains settling, vehicle production is off bottom, and prices should roll over early next year.
At root, the higher inflation is due to the supply-side disruptions caused by the pandemic, especially the Delta wave of the pandemic. As the pandemic recedes – each wave is less disruptive than the previous one – inflation will moderate.
Read 4 tweets
22 Nov
The more I digest the inflation data, the more convinced I become it is peaking and will be decidedly lower by this time next year. Gas and most goods prices will fall by then, and the normalization of prices for services will be over.
The histrionics over inflation rest on a wage-price spiral. But wage growth is up only for low wage workers, who will return to work as the pandemic recedes and they spend their excess savings. Stronger productivity will also help.
Higher inflation expectations is also necessary for a spiral. But they are currently precisely where the Fed wants them. Look at 5-year, 5-year forwards, 10-year TIPS inflation break-evens, and my favorite, the Phila Fed survey of economists.
Read 4 tweets
25 Oct
Excess savings for many households is likely to be gone before the end of the year.
As of September, households with incomes in the 20%-60% range of the income distribution have an estimated nearly $500 billion in excess savings.
This excess savings amounts to about $10,000 per person in this income group but expenses are close to $4,000 per month.
Read 9 tweets

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