Economists spent the past three decades perfecting the art of Keynesian stimulus. Then Covid hit. 

As the months drag on, it’s increasingly clear that Covid is more of a supply shock than a demand shock to the U.S. economy. Do you remember the endless stories about supply chain problems after the 2007-08 financial crisis? Nope. Neither do I. Because they didn’t exist. Did we have soaring prices after 9/11? Nope. Container ship shortages after the dotcom collapse? Of course not.  

All the recent crises we’ve dealt with have been negative demand shocks to the U.S. economy. And that has empowered the Keynesian approach of filling demand drops with government stimulus–or consumer spending, as in the case of 9/11, when President Bush famously told families to go about their lives (“fly on airplanes…travel…Get down to Disney World”) in order to keep the economy from worsening.  

So naturally, when Covid hit, and people worried…

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