Proved Fucking Right

Took awhile.

For most of the past four decades, American policy-makers have set the opposite priority. When consumer demand is high and labor markets are tight, it is difficult for employers to replace their existing workers with unemployed ones. For this reason, in a “full employment” economy, workers can generally extract higher wages from their bosses through the implicit or explicit threat of quitting. And when workers win wage increases, employers sometimes respond by raising prices. Following the “stagflation” crisis of the late 1970s, America’s fiscal and monetary authorities decided that preempting price hikes was so much more important than promoting full employment that they had a duty to keep millions of Americans involuntarily unemployed at all times, lest labor secure too much leverage over capital. As recently as 2015, Democratic Fed chair Janet Yellen began raising interest rates to deliberately “cool off” the economy and slow job growth because all serious policy wonks believed that if the unemployment rate fell below 4 percent, runaway inflation would ensue.

For roughly 40 years, progressives have been protesting the macroeconomic orthodoxy that the social and economic benefits of maximizing employment are dwarfed by the harms of a hypothetical spike in inflation as being both morally unacceptable and empirically unfounded. And anyhow, the risk of runaway price increases has been perenially overestimated. Meanwhile, left-wing economists were pleading with Democratic deficit scolds to cease sacrificing GDP growth on the altar of their own fiscal illiteracy.

With the ARP, the Democratic Party has affirmed its advice in word and deed. As the president said in February, tacitly rebuking Summers, “The risk isn’t that we do too much when it comes to a COVID-relief package — it’s that we don’t do enough.”