The US economy just grew at its fastest rate since 1984
The outstanding growth also narrowed the gap between potential GDP and actual GDP, the PIIE team said. Economic output sat 3.6% below the CBO's pre-pandemic forecast at the end of 2020. That gap has since narrowed to 0.2%, the researchers said, signaling the economy has nearly recovered all growth it lost to the pandemic and its related lockdowns.The incredible growth seen over the past year has also come with a new, equally extraordinary challenge for the Biden administration.
That, too, harks back to Reagan's time in office. Though price growth had dramatically slowed by the time Reagan was running for his second term, his first years in office featured inflation as the country's paramount economic issue. Price surges that began in the 1970s came to a peak in early 1979 but remained stubbornly high as Reagan entered the White House.
Biden is taking the opposite approach. The president framed his Build Back Better spending bill on January 19 as the best way Congress can counter inflation, saying the package"will address the biggest costs that working families face every day." By spending on programs that cut costs in healthcare, childcare, and energy, Biden argued, the package could help pull inflation lower.
It remains to be seen whether BBB is passed or if Biden can quash inflation as Reagan did. What's certain is that he'll have some help from the country's central bank. The FOMC"is of a mind to raise the federal funds rate at the March meeting" to begin combatting inflation so long as the conditions are right, Fed Chair Jerome Powell said in a
. The Fed's own projections showed policymakers anticipating at least three rate hikes in 2022 and another in 2023 as they look to ease inflation.was unlike any in history, and while inflation has yet to cool, the recovery through 2021 is superlative on its own.Subscribe to push notifications
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