STEVE INSKEEP, HOST:
What's the right amount of money to get Americans through a few more months of the pandemic? President Biden is hoping that Congress approves COVID relief now that they're done with impeachment. A lot of the money would finance payments to Americans, $1,400 for most people. Cities, states and schools would also get some money. Earlier this month, the White House economic adviser Jared Bernstein said people need it all.
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JARED BERNSTEIN: We have to hit back hard. We have to hit back strong if we're going to finally put this dual crisis of the pandemic and the economic pain that it has engendered behind us.
INSKEEP: As you may have heard, the administration is asking Congress in total for $1.9 trillion. It politely turned down a call by some Republican senators to spend less. But economists still have questions about the price tag. So let's talk this through with NPR chief economics correspondent Scott Horsley. Good morning.
SCOTT HORSLEY, BYLINE: Good morning, Steve.
INSKEEP: Why would there be doubt about 1.9 trillion?
HORSLEY: It is that price tag. One of the most prominent critics is Larry Summers, who was Treasury secretary in the Clinton administration. He was also an economic adviser to former President Obama. Summers told NPR's Weekend Edition, it is important for the government to go big, but maybe he says not this big.
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LARRY SUMMERS: If your bathtub isn't full, you should turn the faucet on. But that doesn't mean you should turn it on as hard as you can and as long as you can. The question isn't whether we need big stimulus. The question is whether we need the biggest stimulus in American history.
HORSLEY: Summers worries that spending this much money on short-term relief would make it harder for the administration to make the kind of long-term investments that it wants to in things like infrastructure. He's also worried that a rescue package this big could overheat the economy and trigger something we haven't seen in a long time, Steve - inflation.
INSKEEP: Well, how worried, if at all, is the administration about inflation?
HORSLEY: The administration is a lot more worried about the people who've lost jobs and about the parents who can't work 'cause their kids aren't in school. The latest congressional forecast predicts it will be 2024 before we get back all the jobs that were lost last year. And the administration says that's not good enough. Treasury Secretary Janet Yellen told CNN she thinks the U.S. could be back to full employment next year if Congress passes the president's rescue plan. And keep in mind, Yellen used to be the chair of the Federal Reserve, where inflation was a big part of her responsibility.
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JANET YELLEN: I've spent many years studying inflation and worrying about inflation. And I can tell you we have the tools to deal with that risk if it materializes. But we face a huge economic challenge here and tremendous suffering in the country. We've got to address that. That's the biggest risk.
INSKEEP: Let's ask about the reassurance she offers there. When she says we have the tools to deal with the risk of inflation, what's she mean?
HORSLEY: Traditionally, when the economy overheats and that causes a jump in prices, the Fed tries to cool things off by raising interest rates. And for decades, the Fed was really aggressive about that, sometimes raising rates preemptively just in case prices might go up. But now the central bank has really changed its thinking about that. In recent years, we saw that unemployment can go a lot lower than many people expect without overheating and triggering inflation. And that was really good for a lot of people, especially those at the bottom of the income ladder. So the current Fed chair, Jerome Powell, says he's just not too worried about inflation, even though he says we could see some temporary price hikes later this year.
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JEROME POWELL: If the economy reopens, there's quite a lot of savings on people's balance sheet. You could see strong spending growth, and there could be some upward pressure on prices there. My expectation would be that that will be neither large nor sustained.
HORSLEY: For a long time now, inflation has been lower than the Federal Reserve would like it to be. And the central bank says it will only raise interest rates once we get back to full employment and inflation has been running above 2% for a while.
INSKEEP: Scott, thanks for the insights. Really appreciate it.
HORSLEY: You're very welcome.
INSKEEP: NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.
