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Sen. Tim Scott presses economist nominee on stimulus, inflation and ‘‘lean against the wind’’ approach
Summary
Senator Tim Scott, chairman of the Senate Banking Committee, pressed Dr. Myron, a witness, on whether large post‑pandemic stimulus packages contributed to the 2021 inflation spike and how his recommendations would differ from his predecessor.
Senator Tim Scott, chairman of the Senate Banking Committee, asked Dr. Myron how his recommendations would differ from his predecessor on the role of large stimulus bills and whether the American Rescue Plan contributed to the inflation spike of 2021.
Dr. Myron, a witness before the committee, said the guiding principle of macroeconomic policy is to ‘‘lean against the wind’’ — supporting the economy when it is in a rut and holding back when the economy runs above potential. He described the CARES Act as roughly aligned with the output gap early in the COVID period and said a subsequent package of similar size was inappropriate.
"One of the core principles of economic management of the economy is that, economic policy should, as economists say, lean against the wind," Dr. Myron said. He added that "by the time we get to the American rescue plan, the output gap is just about narrowed. It's only about a percentage point of the economy. So following it up with another stimulus package of roughly similar size was, you know, an economics 101 style error."
Senator Scott opened by saying his predecessor, Dr. Bernstein, had advocated for the Green New Deal and the American Rescue Plan, and asserted that the American Rescue Plan's roughly $1.9 trillion in spending "led to the 9% inflation that we experienced in the summer of '21." Dr. Myron did not repeat that causal phrasing; instead he emphasized a return to traditional countercyclical policy if confirmed to a position that would advise on economic management.
The exchange focused on the size of stimulus relative to the estimated output gap: Dr. Myron said the CARES Act matched an estimated 10% output gap early in the COVID downturn, while the later American Rescue Plan arrived when the gap had largely closed. He characterized a second stimulus of similar magnitude as an error in basic macroeconomic policy.
No formal votes or policy decisions were taken during this portion of the hearing; the record shows this was a line of questioning for a witness about principles that would guide future recommendations.
Provenance: Excerpts of the hearing transcript capture Senator Scott's question and Dr. Myron's responses (transcript segments beginning at 0.00s and 30.24s through 99.19s).
