STANFORD ¨C The year 2023 will be remembered for many significant economic, political and technological developments.
But one of the most noteworthy is something that did not happen: a recession in the United States. While parts of Europe flirted with recession and China stumbled after lifting its ¡°zero-COVID¡± restrictions, the U.S. labor market and American consumers proved quite resilient.
That came as no surprise to me. In the summer of 2021, I predicted that President Joe Biden¡¯s so-called American Rescue Plan ¡ª an unnecessary $1.9 trillion package of cash payments and subsidies that was three times the estimated output gap over the next two years ¡ª would cause a bout of high inflation. In response, the Federal Reserve would have to raise its target interest rate and the economy would duly slow.
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