Scott Sumner Says Fix the Jobs

This is part of the series highlighting supporters of pro-jobs policies. An updated list of supporters can be found here

Scott Sumner is an economics professor at Bentley University and writes on monetary policy at his blog The Money Illusion.

He has been a supporter of strong monetary stimulus that help the economy get back to full employment as quick as possible. In one of his posts he writes “An open letter to conservatives” where he explains why QE is important in helping the economy recover and why inflation is not something that conservatives should be worrying about with the current state of the economy. He states that:

“The Fed isn’t really trying to create inflation.

The Fed doesn’t directly control inflation; they influence total nominal spending, which is roughly what Keynesians call aggregate demand. Whether higher nominal spending results in higher inflation depends on a number of factors, such as whether the economy has a lot of underutilized resources. But it’s certainly true that for any given increase in NGDP, the Fed would prefer more RGDP growth and less inflation. Even after QE2, the Fed still expects less than 2% inflation for years to come. If the Fed had any marketing sense, they’d be telling the public they are trying to boost recovery by increasing national income, not increasing the cost of living. It would also have the virtue of being true.”

Currently, he still believes that the monetary policy enacted since the recession has not been expansionary enough and that new Fed Chair Janet Yellen will not be able to enact the expansionary policy needed; just like Ben Bernanke indicated he was unable to implement a more aggressive policy during his tenure. Sumner is able to encapsulate the problem with Fed policy making, “It’s the zeitgeist, stupid.”

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