Demographics, Deficits, & Deflation
Secular trends are conspiring with the Pandemic to reduce demand in the US. Favorable demographics should enable higher productivity and constrain inflation. In contrast, expanding debt service and higher tax rates will crimp future growth while declining household formation further slows demand. Future policy choices' precision is irrelevant to the greater need to avoid a change of consumer behavior that a continuing Pandemic may bring. A newfound thrift by consumers from the Pandemic would further slow growth and is unnecessary. Policy action is required to avoid a decade’s long impairment of consumption. Best pay now, rather than a higher bill later.