Skip to main content

Clipping the governor’s control of federal funds

Quoted: Menzie Chinn, an economist with the Robert M. LaFollette School of Public Affairs at the University of Wisconsin-Madison, is skeptical of the idea that federal pandemic relief spending is the primary cause of recent inflation.

“It’s certainly part of the explanation – but other economies (UK, Euro Area) have also seen an acceleration of inflation,” Chinn says, with higher oil prices, continued supply disruptions and other factors being the main contributors. “One could argue that part of the inflation is due to too little spending, say, on childcare support, which would enable parents to work.”

Mark Copelovitch, a La Follette School political scientist whose work looks at the intersection of economics and politics, says that the ability of the U.S. to finance its debt at virtually no interest shows that the marketplace — essentially, the world’s lenders — isn’t worried about the sustainability of the economy.

On inflation, he considers shortages such as in semiconductors, a key component of cars, or the spike in energy prices, not pandemic relief aid, as leading culprits for rising prices. “Most of what’s driving the inflation is global supply chain issues during a pandemic,” Copelovitch says.

He credits pandemic relief, in the form of direct aid to households as well as other forms of support as well as directly to the state, for preserving incomes, keeping businesses going in the pandemic, and enabling the economy to recover much more quickly than it might have otherwise.

“The reason we have this big surplus now in Wisconsin and elsewhere is because all the other things basically prevented people’s incomes from going down — which meant tax revenue didn’t crater like we worried it was going to,” Copelovitch says.