Confronted by higher inflation for the first time in his life Matt Yglesias engages in what I think is wishful thinking in a piece at Bloomberg:
Beyond the green-eyeshade aspect of it, the difficulty is that the U.S. economy is now constrained by real resources. Policies such as student-loan relief, which could have been useful stimulus a few years ago, have become inflationary. Even tax cuts, unless offset by spending cuts that take money out of someone’s pocket, would fuel inflation.
By the same token, new spending on social benefits that puts cash in pockets will be inflationary unless it’s taxed away from somewhere else. While a few years ago Biden could have argued that his tough “Buy America†provisions for infrastructure projects were necessary to create jobs, today there is an excess of job openings.
and
This administration, whatever its other shortcomings, has cured a chronic demand shortfall that has plagued the U.S. for decades. Now it needs to pivot from progressive dreamscapes and toward a universe of hard tradeoffs. Deficit spending and protectionist regulations can no longer be justified as stimulus — and it’s not practical to fund programs by taxing the wealth or unrealized capital gains of billionaires.
In other words: Spending more in one area will require spending less in another. That can be done with taxation to reduce private spending — it can even be done with taxing the rich — but the base would need to be larger than the tiny groups targeted by these kinds of ideas.
Leaving aside his remark about a “chronic dmand shortfall”, something for which I see little evidence (consider this list—the U. S. realizes the highest percentage of its GDP of any major economy), I think he’s making a very bad assumption: that political leaders will be responsible and do things they haven’t done in their political lives. To my eye Republicans only know how to cut taxes—it is their panacea. Similarly, Democrats only know how to increase consumer spending. If MY is only experiencing inflation now, think of poor Joe Biden and Nancy Pelosi. They’ve never faced a situation in which fiscal restraint is necessary.
I would welcome Democratic proposals to tax “the rich” but I doubt they will be forthcoming. What they are more likely to propose is to tax some of the rich but not others, maximizing political leverage in the process. Similarly, I would welcome Republican proposals to reduce spending but I don’t believe those will be forthcoming, either. They never have been including while Ronald Reagan was president, indeed, especially when Ronald Reagan was president.
No, they’ll stick with the ones that brung ’em regardless of consequences.
