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Their view: US economy might be condemned to relive the ’70s

A Joe Biden presidential administration, which is becoming more probable as his lead in the polls grows, probably will try to avoid the mistakes that held back the economic recovery after the 2007-09 Great Recession. His fiscal agenda is getting bolder. The Federal Reserve is also pledging to keep monetary policy loose until inflation actually emerges.

But potential supply bottlenecks loom if the U.S. breaks out of the slow-growth trap that has plagued the economy during the past decade. That suggests the economy will need reforms that increase supply in housing, the labor market, and in health care and child care.

We got an unwelcome preview of how this can play out in coastal urban housing markets — at least before the coronavirus pandemic. Jobs and incomes for knowledge workers surged in cities such as San Francisco and New York, but the increase in employment outstripped the housing supply in those metro areas. Even with an increase in high-end residential construction, soaring rents often outpaced rising wages. An economy-wide version of this could unfold in the next few years if the U.S. achieves more robust growth.

Consider the impact on the housing market of an economic agenda that sought to return and […]

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