WASHINGTON: Two top White House economists on Wednesday pushed back against overly rosy interpretations of the Congressional Budget Office’s economic forecasts, and called for immediate action to avert the risk of persistent and long-lasting US unemployment.
Jared Bernstein and Heather Boushey, members of the Council of Economic Advisers, said the CBO’s “dire” forecast that 7 million people will still be out of work in 2021 underscored the urgency of enacting President Joe Biden’s $1.9 trillion rescue plan.
“The costs of inaction are far higher than the costs of acting too aggressively,” they wrote in a blog post viewed by Reuters. “We should not wait for years for the economy to return to full employment and get the economy back to pre-pandemic expectations.”
The CBO this week forecast the US economy will grow more strongly than previously expected - 4.6% in 2021 - after contracting 3.5% in 2020, providing fodder for Republican critics who say Biden’s plan is too expensive and could stoke inflation. The CBO also predicted a drop in the average US unemployment rate to 5.7% in 2021 from 8.1% in 2020 - a big improvement from July forecasts of 8.4% in 2021 and 10.6% in 2020. But it said the number of people employed would not recover to pre-pandemic levels until 2024.
Bernstein and Boushey said some viewed the CBO forecast as a sign that US officials could wait to see whether added fiscal relief was necessary, but they stressed quick action was needed to avoid the scarring caused by prolonged periods of high unemployment and address the disproportionate impact that the crisis has had on women and lower-wage workers.
They said the CBO report made clear that the US labor market would recover too slowly and economic output would fail to recover to pre-pandemic expectations unless additional fiscal measures were taken soon.
“We know that getting back to full employment, as quickly as possible, will make a major difference in the lives of tens of millions of people, particularly those most at risk of being left behind,” they wrote.
In addition, the cost of taking aggressive action now was low, with real interest rates and real debt service payments as a share of GDP at historic lows, they said.
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