Can America Escape the Stimulus Trap?
The United States risks locking itself into a recurring cycle of expansionary monetary and fiscal policies, rising asset prices, and redistributive measures that weaken investment and job growth. Avoiding this scenario will require three complementary reforms to accompany future economic stimulus packages.
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NEW YORK – As US President Joe Biden’s proposed $1.9 trillion economic stimulus package works its way through Congress, former Treasury Secretary Lawrence Summers (a Democrat) and many Republicans argue that the plan is too big. But perhaps a more important question is whether the United States is falling into a “stimulus trap,” and, if so, how to get out of it.