Friday, November 22, 2024

Free Your Mind

I've seen even fairly lefty people "grudgingly" acknowledge that continuing the various Covid-era programs would have been inflationary and therefore politically damaging.

I'm not sure this is obviously true, or at least significantly true, but even if I accepted it, why do we not acknowledge other possibilities?

If aspects of fiscal policy are expansionary (inflationary), we can always offset them with some contractionary bits. Like, you know, raising some taxes!

Or we could've let Powell raise interest rates more!

People will argue that Congress would've never done the first, and that raising rates would've also been unpopular.

As for the latter, this is probably true, though people have strangely been unwilling to acknowledge that raising rates as much as they were raised has been unpopular.  Generally we are very selective about when we acknowledge distributional effects of macro policy and when we pretend they don't exist.

As for the former, well, yes, but not everyone is pundit obliged to limit the possible within perceived political constraints. Also, Manchin didn't sabotage things because of inflation, he sabotaged them because poor people were (to him) spending all their free money on drugs.

That things are politically impossible at the moment does not make them actually impossible.  We can make the case instead of internalizing these artificial constraints.  Otherwise it seems like we're saying "doing nice things for people causes inflation, which they don't like, so we can't do nice things."