Memory says it was a New Yorker cartoon from decades ago which referenced a portion of the population that still believed in Santa Claus. Many readers have probably arrived at the cartoon’s punchline: the Democrats were the ardent believers. Get it?
It seems they still believe. In his recent acknowledgment that he was wrong about the “inflation” of the moment, Democratic Party hero Paul Krugman pointed to the $1.9 trillion American Recovery Act as something he misread. Apparently it stimulated the economy too much, and inflation was the result. Some Dems believe in Santa, and some really do. Classify Krugman in the “really” category.
That Krugman has gotten false religion about the supposedly inflationary implications of a $1.9 trillion spending bill shouldn’t surprise the mildly sapient even an iota. Of course Krugman believes this. In his parallel universe, government is the proverbial other; capable of putting money in our pockets without pickpocketing others. If we accept what Krugman believes, Haiti is depressed today and the former Soviet Union was over the thirty years ago simply because government failed to spend enough.
Back to reality, governments can only spend what they’ve taken from us first. Government waste (a redundancy) happens after the actual economic growth that enables the waste. It’s truly sad that something so obvious requires stating, but in the thoroughly dumbed down world of modern economic discourse, “there’s no such thing as a free lunch” needs to be repeated over and over again. Government quite simply cannot increase demand. It can only shift it, on the way to shrinking it over time. Government spending is a brutal tax. It’s an extraction of precious resources from private hands that puts it in political hands. The result is less production over time, and less demand. It’s all so basic.
That it’s so basic speaks to why we shouldn’t be surprised that the Democrats are increasingly falling in line with the inflation narrative. Individuals who believe in Santa would logically believe that wealth redistribution by government not only wouldn’t hurt the economy, but would in fact create a demand multiplier. By the illogic embraced by Democrats, the answer to slowing economic periods is theft, with locking the thieves up the inflation fix.
Assuming any of this elicited laughter from Republican readers, or even a superior countenance, it’s time to burst such a bubble. Really, what’s different about Republicans at the moment? They too are promoting the false notion of “excess demand” born of government spending, and they’re doing so at the most prominent of locales for conservative and Republican opinion. It’s sad to watch, but if you’ve been reading opinion pieces about inflation from members of the Right of late, you’ve been reading a variation of the Krugman theme that government can redistribute wealth without redistributing it away from the producers of it. See Phil Gramm, John Cochrane, etc. etc.
Further evidence that the economic discussion has been dumbed down quite impressively is that if the cartoonist of decades ago were drawing his picture today, he’d include Rs with the Ds. Sorry Republicans, but you can’t claim “excess demand” from government spending while also claiming that there’s “no such thing as a free lunch." If you think it’s “wealth redistribution” then you’re contradicting yourselves with talk of “excess” anything.
Still, there’s something more troubling about the conservative stance on “inflation.” The view here is that we should expect more of conservatives who at least bill themselves as leading with logic over emotion.
Let’s think about the above in terms of what happened in March of 2020. It’s not just that large swaths of global production were halted, it’s that the billions of human hands involved in that production were displaced to varying degrees, including tens of millions who lost their jobs altogether. Please stop and think about this. It’s no secret that production in copious amounts is a beautiful consequence of remarkably symmetrical global cooperation. Said another way, the miracle was the low prices that prevailed before the lockdowns.
About those prices, that Democrats wouldn’t see them as miraculous is a statement of the obvious. To members of the Left, it’s accepted wisdom that businesses “gouge” their customers. To Democrats, prices are always higher than they otherwise would be owing to “big business.” Worse, Democrats take production of abundant plenty for granted. To them, this production just happens, and since it does, tax it at nosebleed rates.
At least in the past, Republicans adopted an opposite stance. To them, production was never a sure thing. The price of work and production needed to be low (reduce taxes) so that there would be more of it. Better yet, Republicans knew that businesses competed feverishly with each other to consistently bring down prices.
It all speaks to how disheartening all the GOP and conservative talk of “inflation” is. If we ignore that rising prices frequently are not inflation as is, implicit in Republican whining about prices is that the lockdowns didn’t matter; that the stilted, stop-and-start production that followed the lockdowns was irrelevant in concert with the evisceration of supply lines that the latter entailed. It presumes that what preceded the lockdowns was surplus of little relevance to prices. Yes, neo-inflationist Republicans are giving the impression that they, like the Democrats, view production as a given, and that the cessation of same shouldn’t mean much.
Except that it does. You quite simply cannot crush global economic cooperation and expect prices to remain anywhere close to the same after doing so. That Democrats don’t understand this is yet again a given. They never did.
The sad thing is that in their grandstanding about “inflation,” Republicans are mimicking their haughty adversaries on the other side of the aisle. The problem is that the bitter fruits of command-and-control are not inflation. That the dominant ideologies think they are is a sign that belief in Santa is no longer a partisan notion.
