Larry Summers is worried that the economy faces a hard landing as the Federal Reserve attempts to bring inflation under control. The former Treasury secretary recently said, “My worst fear would be that the Fed will continue to be suggesting that it can have it all in terms of low inflation, low unemployment and a healthy economy.” Many other pundits also warn that the economy is on the edge of recession. While a recession is not inevitable, history shows that soft landings are difficult to achieve.
Let’s look at some background before getting into the specifics of our situation. During an economic recovery, the unemployment rate gradually declines. A useful definition of a soft landing would be a period of at least three years of economic growth with low inflation even after the labor market has full recovered from recession. Surprisingly, there is no evidence that the United States has ever achieved a soft…
