Biden wants the biggest boost in modern history. Is it too big?

“There are pros and cons,” she says. “Running the economy on the hot side might be a good thing, but there could also be a painful adjustment with a period of slow growth on the other side of the mountain.”

In a booming economy, employers face a labor shortage and must increase their wages to attract staff. This, along with potential shortages of various commodities, can, in theory, fuel a vicious cycle of rising prices.

Over the last 13 years, arguably longer, the United States has had the opposite problem. Large numbers of working-age Americans – ages 25 to 54 – have been either unemployed or excluded from the workforce altogether. Wage growth has been weak most of the time, and inflation has remained below Federal Reserve target levels.

Some argue that the estimates of potential output by the CBO and private economists are too pessimistic – that Americans should dare to dream bigger. “We don’t really know what the output-to-GDP gap really is,” said Mark Paul, an economist at the New College of Florida. “For decades economists have been wrong and overly cautious, thinking that full production is significantly less than it really is. We have consistently run a cold economy, creating huge social cohesion problems. “

In an article published in December, he said that a pandemic assistance package of more than $ 3 trillion would be justified based on the scale of the job losses that have been suffered. The output gap looks worse on the employment basis than it does when you look at GDP, in part because job losses have occurred disproportionately in sectors that generate economic output by relatively weak worker, such as catering.

Nonetheless, the scale of aid for the pandemic already underway helps explain why Mr Biden faces a difficult path to finding a Senate majority for the next bill, even among Republicans who are not fully conceptually opposed to stimulus spending.

“It’s hard for me to see, when we’ve just spent $ 900 billion in aid, why we would have such a big package,” Senator Susan Collins, Republican from Maine, said recently. “In a few months maybe the needs will be obvious and we will have to do something important, but I don’t see it now.”