America’s outlook: Not all doom and gloom

AN air of pessimism about the future of the American economy pervades some official circles in the United States and elsewhere. It is time to dispel it.

The pessimists worry that a series of supply shocks over the past 2 years – owing to the Covid-19 pandemic, production disruptions in China, and the Russian invasion of Ukraine – has derailed economic growth. Moreover, the US Federal Reserve is now inclined to raise interest rates until monetary policy, in the words of chair Jerome Powell, brings “some pain to households and businesses”, which is supposedly the only way to bring inflation under control.

But an alternative view has not received nearly the attention it deserves. According to its proponents, the US economy is poised for significant sustained economic expansion, because developments in the past 3 years have removed – through luck and a new policy consensus – a major impediment to inclusive growth.