I was right.

This weekend, Joe Weisenthal asked the following question:

A year ago, there was a lot of debate about whether Biden’s checks at the start of his administration had caused the inflation.

Where do people stand on that right now?

My swift reply:

In today’s post, I back it up. I pulled together my ‘top ten’ posts. The fiscal relief to families, workers, and small businesses was successful. There was no recession, and inflation is coming back down. We are not out of the woods, but it’s very clear that’s where we are headed. I told you that all along.

10. Covid was the root of all evil.

One common theme is we don’t know yet what we need to know about Omicron. Even so, we know how to fight Covid—access to vaccines and boosters (worldwide), public health education, ventilation, masks, social distancing. We must do better.

Another theme—one that I recognized in the spring of 2020—is many of my macroeconomist peers are doing a shitty job with Covid. Every single one who talks about inflation should talk about Covid. I do. Most don’t.

… So, here we are. Macroeconomists of the world unite. And fight about inflation. About labor shortages. About excess savings. Huh? Fight about everything but the actual thing that needs fighting. Covid.

9. More jobs are good for everyone.

A strong labor market gives workers bargaining power. Often that good news for workers is framed as bad news for the economy. The high rate of workers quitting and moving to better jobs is described as a sign of “overheating,” since companies must increase pay to hire. Even if wage gains aren’t keeping up with inflation, higher base pay matters. More money is good for workers and their families.

… Our current recovery with low unemployment but high inflation is an incomplete one. The frustration of Americans today is not because they don’t care about low unemployment; it’s because inflation is too high. And that’s fair to be angry.

But, it’s incorrect for talking heads to argue that the recovery is a failure because policymakers did not prioritize low inflation. One could make a case against the recovery from the Great Recession which did not prioitze low unemployment. But it’s not worth arguing over which one was better. It’s time to get this recovery done.

8. The hawks are the problem now.

Day after day this week, week after week for months, the developments in the world, the economic data, and guidance from the Fed raised the likelihood of a “soft landing” next year. Among those experts grounded in reality, the profound pessimism from early this year is shifting to cautious optimism, moving us toward our ultimate goal: plentiful jobs with good pay and low inflation. Keep fighting.

…Yes, most professional forecasters and I expected inflation to be back down by now; I was Team Transitory. I was wrong. Why? Covid was not transitory. This time last year, we were rolling from the horror of delta into Omicron, killing millions. And only months later, Putin invaded Ukraine and sent food and energy prices skyrocketing. None of the inflation hawks in March 2021 talked about Covid variants or Putin. They still don’t. They were wrong about why inflation shot up and lasted as long as it did.

Being right for the wrong reason makes someone dangerous..

7. The recovery was so worth it for so many people.

We can lower child poverty and food insecurity; the disadvantaged can get jobs and health insurance, people without a bank account can get one, and people with debt can pay it down. Not only can we do these things, we did them. If you had told me in March 2020 or even March 2021, when the CARES Act and American Rescue Plan, respectively, passed, all that we would accomplish, I would have looked at you in disbelief.

Let’s talk about what’s good in the recovery; there is much to talk about in that respect. Yes, inflation is a problem, but it’s coming down. If we don’t talk about the good from the recovery, it could slip through our fingers, and that’s a real danger now. Fighting inflation is important, but so is fighting for the progress in this recovery.

6. Macro must get tools that work.

The pandemic caused hardship among families, the unemployed, communities, and businesses. Thankfully, it was met with massive economic relief—trillions of dollars from Congress and rock-bottom interest rates from the Fed.

Not everyone agreed with that relief, especially the $2 trillion American Rescue Plan in March 2021. Though not alone in his concern, Larry Summers is the loudest of its critics. Soon after it passed, he made a dire prediction.

… Clinging to the Phillips Curve threatens the U.S. economy. We don’t need a recession; we don’t need sky-high interest rates. We need more workers and investment. This is not an academic debate; our future is on the line.

5. Stimulus checks did immense good; research proves it.

Congress had a choice to make during the Covid crisis: Get some money to families like we did during the Great Recession. Or go big and get a lot of money out.

They went big, really big.

In 2008, Congress enacted one round of stimulus checks, totaling about $110 billion. During the first year of Covid, it sent out three rounds at close to $1 trillion dollars. A family of four got $11,400, which is about 20% of median family income. Wow! …

Yes, today, we are paying more. We are getting so much more stuff. AND millions of jobs have come back (millions more to go). The speed of this recovery is not normal. The recession was not a mild one, It was the deepest since the Great Depression. DO YOU REMEMBER 2020? AAARRRRGGGGHHHH. We are not back to normal yet, but compared to last time, policy is fighting for us.

4. Recession, recession, recession. No!

The news is grim. Fears are rampant. Should they be?

I will say emphatically and with data to back me up: we are not in a recession now. Businesses added almost 400,000 jobs last month, and the unemployment rate held at 3.6% for the third month. That’s outstanding. That’s not a recession.¹

I am not the only one who is feeling good about the labor market. Last month 7 in 10 people said they expect unemployment to decline in the next year or stay about the same. I do too. That’s not a recession brewing, at least not the expectation of one.

3. Workers won big this time.

Jobs Day was a good day.

Workers getting a new paycheck and many getting a bigger one are things to celebrate on a human level. On the economic level, they are, too.

The sizable payroll gains as an encouraging sign that labor shortages are easing. During the recovery, ‘missing’ workers are right up there with broken supply chains as holding the recovery back and pushing up prices. And high wage growth last month? How else are you going to bring workers back when they’d held out until now? Plus, there are clear indications that the growth in spending by consumers and businesses is cooling off, though the level remains high. The hiring in July is supply catching up.

2. We do not need a recession.

Being right for the wrong reason can be a big problem. If you misdiagnose the disease, you will likely prescribe the wrong medicine. You won’t cure it, and you could make it much worse.

The experts who say “we need a recession” or big payroll numbers might be a “nightmare” are those who warned that the Rescue Plan would spark high inflation. Inflation did pick up a lot. They were right about the direction. But, while the Rescue Plan played some role, it is not the reason for the inflation. Covid and the war in Ukraine caused massive, ongoing disruptions once you accept that it’s time to back away from the Phillips Curve.

1. American Rescue Plan for the win!

Inflation hawks will tell you the Rescue Plan was a massive failure, citing only higher inflation. They are wrong, and we cannot allow them to write the Covid history book. Yes, inflation’s been higher and for longer than expected by proponents of more relief like myself. Put inflation in CONTEXT, and the hawk’s case falls apart.

If you look broadly at what’s happening in the U.S. economy—inflation-adjusted consumer spending, jobs, business investment, and household balance sheets—it’s clear that Americans are winning. That was not the case after the Great Recession when some of today’s hawks led policy.

In closing.

Working out the disruptions that Covid wrought has been slow and painful. I did not expect inflation to go as high and take as long to come down as it did. I did expect us to come out on the other side in a better place, and we have.

It is not about me or my macroeconomist peers who got this right or wrong. It’s about the Americans who got a hand up after we had fallen down.