The Inflation Temptation
Will, George F., Newsweek
Byline: George F. Will
But first, 'dollars for dishwashers.'
Was this a pebble that presaged an avalanche? The chief economist of the International Monetary Fund recently recommended that central banks raise their inflation target from 2 percent to 4 percent. The inflation temptation is back.
Just 18 years of 4 percent inflation would cut currency's value in half. Furthermore, governments have neither the skill to precisely calibrate inflation at 4 percent nor the will to hold it there. But as an alternative to tax increases that would extinguish economic growth, or to spending cuts that would extinguish political careers, inflation--the surreptitious, slow-motion repudiation of debt--may look to elected officials to be the prudent, or least imprudent, policy.
Briefly pausing in his campaign for a vast new health-care entitlement that would increase the deficit by a trillion dollars over the next decade, Barack Obama recently created a commission to suggest deficit-reduction measures. The commission's Democratic co-chair, Erskine Bowles, knows bankruptcy: He was on General Motors' board of directors, a.k.a. the Board of Bystanders, as GM went bankrupt. The commission is supposed to submit its ideas after November's elections, naturally, but it could issue a seven-word recommendation right now: Stop doing almost everything you are doing.
The administration will spend $289 billion of the "stimulus" money during the next nine years, when, the administration says, the economy will be humming. The administration projects that between 2011 and 2019, the economy will be growing faster than the norm since 1945.
To make amends for his damaging disparagements of business conventions in Las Vegas, Obama went there shortly after announcing the deficit commission and announced a $1.5 billion program for housing aid targeted at a few states, including Nevada. That is a paltry sum--a rounding error relative to Obama's grander undertakings--as is the 10-times-larger $15 billion House-passed jobs bill. Both are trivial interventions in the nation's $13.2 trillion economy, but both also are emblematic of the fact that the deficit has no inhibiting effect on the president who created the deficit commission, or on the Congress his party controls.
Today's "dollars for dishwashers" policy--federally funded state programs subsidizing appliance purchases--aims to replicate the eccentric success of Cash for Clunkers, which last summer accelerated many car purchases from the fourth quarter of 2009 to the third quarter, at a cost of $3 billion. …