Americans are becoming increasingly worried about inflation. Justin Wolfers, professor of public policy and economics, discussed the Federal Reserve's current approach to intervening in the economy to address the issue.
"The mechanism by which monetary policy addresses inflation is it slows down the economy. It's a very, very painful path. What (Fed Chairman Jerome) Powell is hoping for is a so-called soft landing, creating a small number of jobs each month, and allowing the economy to go sideways and it catches its breath," he told CNN Business. "There's a long history in the US and elsewhere of failing to achieve that soft lending."
Recently, the Gas Prices Relief Act was introduced in the Senate, which would temporarily suspend the federal gas tax until 2023 and attempt to combat inflation. Wolfers explained why the bill wouldn't help in the long run.
"If we eliminate taxes on gas tomorrow, that will reduce the price of gas. That’s a one-off effect but remember, inflation is not just that prices got high, it’s that they keep rising and keep rising and keep rising," Wolfers told NBC. "All it will do is it will reduce the price of one good for a little while."
The pandemic has created a new normal for society. Wolfers explained how economics has helped Americans cope.
“It’s been a rough couple of years, one of the things that helps us cope is sense-making,” Wolfers told Axios. “Economics certainly helps you understand the broader forces shaping your life.”
Read the items featuring Wolfers:
- President Joe Biden predicts inflation will 'taper off as we go through the year', NBC, February 11, 2022
- The Fed's battle to fight inflation could cause more pain than higher prices, CNN Business, February 16, 2022
- The pandemic is giving Americans an economics crash course, Axios, February 16, 2022