To: Barron’s Letters
Published: April 19, 2021
Barron’s Lisa Beilfuss cites David Rosenberg’s worries about hyperinflation (because of the Federal Reserve’s inability to keep inflation within acceptable rates), as the reason to worry about a sustainable “debt-fueled” recovery.
But rather than compare the current economic recovery from the COVID-19 pandemic to the ‘roaring 20’s’ recovery from the Spanish flu pandemic, why not compare it to our recovery from World War Two? Fighting that war required record debt-to-GDP levels that were brought down by record growth and consumer prosperity after the war, because there was agreement that high government and private spending geared to future growth was necessary with the building of American modern infrastructure and higher education system.
Our capitalist system has always required debt to leverage higher growth and the result has been accelerated growth to reduce said debt to the historical level. Even the CBO in a recent report stated that “Between 1946 and 2019, the deficit as a share of GDP has been larger than that (3.0 %) only twice.”
A major goal of the Biden spending bills is to reverse the record income inequality that has reduced consumers’ ability to spend without higher debt levels since 1980. The COVID-19 pandemic has cost more lives than World War Two and devastated economic growth worldwide. So President Biden’s focus on not only rebuilding infrastructure, but improving our social safety net and reducing the record income inequality of working families will create a more sustainable recovery.
Harlan Green © 2021
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