Well, you could see this one coming from miles away… What’s that? Nobel economists using the GOP’s new definition of “inflation” to critique Donald Trump’s future policies. Of course, it’s easy for the left to use the GOP’s new definition since it has long been their own.
For background, government spending doesn’t cause inflation, or what some on the left (and now right) imagine inflation to be. Members of the left have long asserted that government spending instigates greater growth and higher inflation as redistributed wealth “puts money in people’s pockets” on the way to rising demand and higher prices.
The only problem with the left’s Keynesian “demand-multiplier” argument is that it’s utter nonsense. Government doesn’t extract the wealth that it redistributes from Pluto, rather it extracts it from the productive through taxes and borrowing. In other words, for government to stimulate demand it must shrink it elsewhere. From there, repeat it over and over again that the only source of demand is production. Produce first, then demand. Simple stuff.
The above used to be accepted wisdom among conservatives and supply siders in particular, only for the higher prices born of lockdowns to rear their ugly head. Low and falling prices are a logical and happy result of production being spread across more and more machines and hands around the world, only for panicky politicians the world over to pursue global economic contraction as a virus-mitigation strategy in 2020-21. This mindless response to varying degrees compromised global cooperation with higher prices to this day the predictable result.
Rather than acknowledge the obvious cause of higher prices that are not inflation (command and control is not a currency phenomenon), GOP types decided to play politics with the higher prices. Long-time supply sider Phil Gramm oddly opined in the Wall Street Journal that the government spending and debt under President Biden had fostered the impossibility that is “excess demand” that was allegedly driving up prices. The Keynesian “demand multiplier” lives, on the supply side!
In fairness, it wasn’t just Gramm. Also writing in the Wall Street Journal, the great Judy Shelton puzzlingly asserted that a “major cause” of the CPI at 40-year highs was “the federal government’s putting additional money in the hands of consumers, increasing demand, without increasing supply.” Except that Shelton knows well that government can only hand out what it’s taken.
The main thing is that GOPers found their inner Keynesian in overnight fashion in order to pin the higher prices that would have revealed themselves under any president in order to nail Joe Biden. Unknown was why. Considering the rather empty and doddering president, it was like Nick Saban trash talking Vanderbilt.
Regular readers of these write-ups were made aware that the GOP’s overnight embrace of Keynes in order to redefine “inflation” would soon enough be used against them, and Trump. It was an easy prediction.
You see, former and perhaps future President Trump takes a backseat to no one when it comes to spending, and debt. Worse, Democrats actually believe in the Keynesian multiplier that Gramm, Shelton et al inexplicably embraced not terribly long ago. Predictably, Democrats are painting Trump with the “inflation” brush.
According to Matt Egan at CNN, sixteen Nobel economists have concluded that Trump’s economic program is “inflationary.” They cite the massive spending increases that he signed into law while president as evidence that once back in office, he’ll ignite a huge inflation fire. They also point to his tax cuts, and the “demand” that will spring from them as further evidence of looming inflation. Their arguments are utter nonsense, but so were they when Republicans used them for elder abuse.
As predicted once again, the right’s embrace of the left’s version of “inflation” would compromise its ability to respond when the left applied it to Trump’s policies. Trump’s a big spender, loves “low interest rates,” and as for tax cuts, per Shelton they must “put additional money in the hands of consumers” that government spending formerly removed from their hands.
What’s sad here is that this outcome was all so obvious. Rather than correctly tie the higher prices to lockdowns, the right chose to politicize what Keynesians imagine inflation to be, thus blunting any response to the left’s critiques. Funnily enough now, the dollar under Biden is at all-time lows versus gold only for those same members of the right to not say a word about actual inflation pressures. How could they one supposes, when Trump himself is a proponent of the same dollar neglect that Biden is now mindlessly pursuing.
