Inflation Nightmare?

Michael Kinsley, of all people, has a very interesting article on the possibility and danger of inflation. I say surprisingly because, in the years I have followed him, he has gone from being somewhat liberal to a solid lefty. Further, he himself states that every leading economist (whatever that means) is convinced that there is no danger of inflation. That by itself worries me, because economists, in general, were unable to predict our present predicament.

Kinsley makes sense too. Basically he is saying that since Volcker squeezed out inflation in the late 70s and early 80s, we have been living on credit ever since, and the government's response, Republican and Democrat has been to spend more borrowed money. How this cannot end in inflation is beyond me. The best paragraph:

My specific concern is nothing original: it’s just the national debt. Yawn and turn the page here if you’d like. We talk now of trillions, not yesterday’s hundreds of billions. It’s not Obama’s fault. He did what he had to do. However, Obama is president, and Democrats do control Congress. So it’s their responsibility, even if it’s not their fault. And no one in a position to act has proposed a realistic way out of this debt, not even in theory. The Republicans haven’t. The Obama administration hasn’t. Come to think of it, even Paul Krugman hasn’t. Presidential adviser David Axelrod, writing in The Washington Post, says that Obama has instructed his agency heads to go through the budget “page by page, line by line, to eliminate what we don’t need to help pay for what we do.” So they’ve had more than a year and haven’t yet discovered the line in the budget reading “Stuff We Don’t Need, $3.2 trillion.”

Here is where the Tea Party comes in. It is a central tenet of all of the various Tea Party movements to reign in government spending, to stop new spending and cut existing spending, even if the cuts are to popular programs. There is no other way out, except inflation.

Compared with raising taxes or cutting spending, just letting inflation do the dirty work sounds easy. It will be a terrible temptation, and Obama’s historic reputation (not to mention the welfare of the nation) will depend on whether he succumbs. Or so I fear. So who are you going to believe? Me? Or virtually every leading economist across the political spectrum? Even I know the sensible answer to that.

And yet …

But inflation will wreck the country more surely than Obamacare, this is why we must continue to beat the drum for less spending now.