These days, it seems rather quaint to argue against such things, fiscal responsibility having fallen as thoroughly out of fashion as poodle skirts. I am practically inviting the bemused eye-rolling and sighs that greet anyone old-fashioned enough to suggest that 10 percent deficits or, say, ultraloose monetary policy aren’t good governing choices over the long term.
(I’m not talking about politicians, mind you; politicians tend to favor irresponsibility, because irresponsibility is good politics. I mean the people who genuinely care about good policy and grow impatient with the fogies who won’t get with their new program.)
Why won’t we fussbudgets realize that inflation is quiescent and the U.S. government can borrow money basically for free? Why shouldn’t we leave monetary policy loose and “run the economy hot” for a while, until wages rise to a more desirable level — or load up on that cost-free cash and do all the government projects we’ve always dreamed of?
There are boring, technical answers to those questions. For a good example, read economist Tyler Cowen pointing out that if inflation does increase employment, it probably does so by reducing the inflation-adjusted value of workers’ wages. But what use are technical arguments in a dispute that is fundamentally ideological and perhaps biographical? For I suspect that the biggest divide between parties is not what they know or believe, but what they remember. Moreover, that strikes me as the salient divide in a lot of policy debates — which worries me.
Experimental economists have long noted an interesting phenomenon in lab experiments designed to mimic financial markets: Just as in real financial markets, you get asset price bubbles. The only cure for the phenomenon seems to be letting the same group of subjects play the same trading game a few times, whereupon they recognize the bubble forming and pop it before it gets big. Start over with a new group, and the bubble once again starts to percolate.
During the financial crisis of 2008, I wondered whether it was a coincidence that U.S. financial markets really took off in the 1980s — which was roughly when the last folks who personally remembered the Great Depression retired. Today, I wonder if the newfangled inflation-o-philia might not be somehow related to the fact that fewer and fewer wonks can personally remember getting caught short at the grocery store by an unexpected price hike. Or, similarly, if there isn’t a reason that slogans such as “Defund the Police” seem most popular with people who came of age after the year 2000, when U.S. crime rates were well into their decades-long decline.
I grew up in New York City, smack in the middle of the three-decade spike in crime that preceded the long decline. The number of violent crimes was busy rising more than sixfold, and it seemed that everyone knew someone who’d been seriously victimized. Many New Yorkers took pains to avoid becoming victims themselves: not riding the subway after rush hour or going into the park after sunset, circling out of the way to walk on well-lit and crowded streets, carrying enough cash so a frustrated mugger wouldn’t hurt you.
That was the thinking in my middle-class neighborhood. Things were much worse in poorer areas, where gang wars raged alongside more ordinary street crime. People were desperate to get their streets back, which is why so many of the laws that ultimately led to mass incarceration were initially supported by Black communities that then ended up most affected by the policing.
That’s not to say those were good laws (they generally weren’t), or that racism didn’t also play a role in creating public support for harsh policing (it did). The people shouting “defund the police” certainly aren’t wrong that mass incarceration was a terrible, brutal mistake. But letting crime grow out of control was also a terrible mistake, and it, too, especially devastated our most vulnerable communities. If you have personally witnessed only one sort of tragic mistake, it is easy to leap to an equal and opposite error.
As with inflation and deficits, and so much else, one might argue that the fussbudgets are simply blind to truly revolutionary possibilities. When trends have continued for a good long time people always start thinking that “this time is different,” and sometimes they’re even right. Sometimes, however, they have forgotten that history can repeat itself. And then, unfortunately, they relearn its lessons the hard way.