We asked some prominent participants in the Great Overheating Debate of 2021 to explain what inflationary trends they’re afraid of (or not, as the case may be).

By Neil Irwin

Some big-name economists argue that the economy will soon overheat because of the Biden administration’s $1.9 trillion pandemic relief and other spending measures.

They worry that the economy is being flooded with too much money, a fear only heightened by news that the administration will seek $3 trillion more to build infrastructure, cut carbon emissions and reduce inequality.

But in this debate, what overheating would mean — exactly how much inflation, with what kinds of side effects for the economy — has often been vague. So The New York Times asked some prominent participants in the Great Overheating Debate of 2021 to lay out in more detail what they are afraid of, and how we will know if their fears have been realized. See their full answers here.

It turns out that the two sides — the overheating worriers and those who think those concerns are misplaced — agree on many points. They have common ground on what a bad outcome might look like, and agree that it will take some time to know whether a problematic form of inflation is really taking root. The differences are in how likely they consider it to happen.

The core dispute, one with big consequences for the future of the economy and for the Biden administration, is over the nature of the inflation that is to come.

As the economy reopens and Americans spend their stimulus checks and the money they saved during the pandemic, demand for certain goods and services will outstrip supply, driving up prices. That is now pretty much an inevitability.

The Biden administration and its allies are betting this will be a one-time event: that prices will recalibrate, industries will adjust and unemployment will fall. By next year they expect a booming economy with inflation back at low, stable levels.

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