Longbrake Letter

February 2021

Congress is working to pass the Biden administration’s American Rescue Plan, a $1.9 trillion stimulus package designed to address the myriad problems caused by the COVID-19 pandemic. The size of the package, hot on the heels of $900 billion approved by Congress in December, has raised vigorous debate about whether the size of stimulus is too much and might overheat the economy and unleash inflation. In this month’s letter, Bill Longbrake explains why he believes that is not a threat. But there is another debate that needs to occur, he writes. Despite copious amounts of cash provided to families, unemployed workers and struggling organizations, the American Rescue Plan doesn’t provide long-term solutions for those whose jobs and businesses were permanently destroyed by the pandemic. This omission risks exacerbating the fraying cohesion of our social and political fabric. Read more in the Longbrake Letter.

January 2021

As forecasters peer into their crystal balls, there are super optimists, optimists (the consensus), and skeptics. Maryland Smith’s Bill Longbrake counts himself among the super optimists. Super optimists expect 2021 will be a boom year with real GDP increasing 6% or more. They expect COVID-19 vaccinations will put an end to the pandemic by the middle of the year. Then, the enormous horde of savings that built up during 2020 and the additional fiscal stimulus likely to flow into the pockets of consumers and businesses during the first half of 2021 will spark a go-for-broke spending binge. Optimists, the consensus, expect 2021 to be a very good year with real GDP growing about 5%, but consumers and businesses are more cautious. Skeptics expect a good year, too, but worry about COVID-19 vaccine distribution bottlenecks and new variants that delay herd immunity. Read more in the Longbrake Letter.

Maryland Smith’s Bill Longbrake looks back at 2020 – a year in which the pandemic changed everything – and looks ahead at this year. Pandemic herd immunity is in sight – and with it boom times. In financial markets, questions are being raised about whether those boom times will ignite inflation. Most expect Inflation and interest rates to stay low for years to come. But it would be imprudent to dismiss the possibility of a fundamental shift that unleashes inflation. The inflation process is like a glacier. Both move slowly. But both are hard to stop. And both can have long-run consequences that are dramatic. Read more in the Longbrake Letter.

Robert H. Smith School of Business
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University of Maryland
Robert H. Smith School of Business
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