Paulie Walnuts Krugman has a nice piece out this AM on why the central bank should downweight the views of those who’ve been wrongly crying
hawk wolf re inflation for years now. I’ve made the same point as the din of voices urging the Fed to pre-emptively tighten is getting louder.
One point to add: Paul writes that it’s “less clear” why “the inflation obsession is as closely associated with conservative politics as demands for lower taxes on capital gains.”
I think at least part of the answer is a rule of thumb I’ve been mentally toting around since I read about it 30 years ago: unemployment hurts the poor, inflation hurts the rich.
Obviously, like any such rule, it’s overstated. High and rising inflation hurts everybody, and capital income has taken big hits in recent recessions (though the top 1% has consistently bounced back well ahead of the rest).
But inflation erodes asset values, not unlike a tax on capital gains, and generally speaking, those who depend on portfolios vs. paychecks are going to be less sensitive to unemployment. So, as Paul stresses, they have a class interest to advocate for heading off inflation, even if it’s a phantom menace, while at the same time worrying not so much about the impact of tightening on those who depend on a tight job market.