“I would be concerned about longer-term inflation. That’s something that seems to be picking up, and it’s something that policymakers should really be concerned about,” Slavov said. “Right now, the biggest risk to the economy is inflation. Slavov shared related concerns about inflation, interest rates rising, and the unanswered question of why people are not returning to work at pre-pandemic rates. “If interest rates start rising, the situation gets ugly fairly fast.” On fiscal health, Gale said that nearly all indicators are unfavorable, and that his primary concern is “interest rates, interest rates, interest rates.” “If interest rates stay low, the situation is manageable for a long time,” he said. Gale said the economy has come back relatively fast, thanks in large part to quick action on pandemic relief and stimulus measures, but cautioned that the low aggregate unemployment rate masks high rates for minorities.
In gauging the state of the nation’s economic recovery and fiscal situation, Gale and Slavov agreed that the economy has rebounded significantly from the lows of the pandemic, but that difficult questions remain for policymakers when it comes to inflation, interest rates and labor market factors. Gale and Slavov also authored two of the 10 new papers that comprise the Peterson Foundation’s new initiative, Where Do We Go From Here?, which offers a diverse array of perspectives and solutions on America’s fiscal and economic challenges. William Gale, the Arjay and Frances Fearing Miller Chair in Federal Economic Policy at the Brookings Institution, and Sita Slavov, Professor of Public Policy at George Mason University’s Schar School of Policy and Government, joined Foundation CEO Michael Peterson for a wide-ranging conversation on Tuesday. To shed light on the best way forward, two top economists participated in a panel discussion as part of the latest edition of the Peterson Foundation Economic Forum. With our economy in recovery, the national debt rising unsustainably, the country still grappling with a devastating pandemic, and lawmakers pursing significant new legislation, America faces many critical questions for its future.
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