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The Most Important Developments of 2023

Among the issues that defined 2023 were the US economy's "soft landing," the war of attrition in Ukraine, Hamas's terrorist attack and its fallout, explosive advances in AI, and the loss of two great American public servants. All remind us that the world is in desperate need of new leaders who are both competent and inspiring.

STANFORD – The year 2023 will be remembered for many significant economic, political, and technological developments. But one of the most noteworthy is something that did not happen: a recession in the United States. While parts of Europe flirted with recession, and China stumbled after lifting its “zero-COVID” restrictions, the US labor market and American consumers proved quite resilient.

That came as no surprise to me. In the summer of 2021, I predicted that President Joe Biden’s so-called American Rescue Plan – an unnecessary $1.9 trillion package of cash payments and subsidies that was three times the estimated output gap over the next two years – would cause a bout of high inflation. In response, the Federal Reserve would have to raise its target interest rate, and the economy would duly slow.

Still, I was not among the majority claiming that a recession was imminent. Instead, I thought there was a good chance of a soft landing (a falling inflation rate in the absence of higher unemployment), because all the recent difficulties in hiring and retaining workers would prompt many firms to hoard labor.