I am just old enough to remember inflation. As a kid, I didn't really feel the sting and uncertainty of constantly rising prices, except when waiting in a gas line while the guy in the kiosk manually changed prices. But the fear of too many dollars chasing too few goods was in the headlines enough that I distinctly recall poring through the business pages, crunching the numbers, and concluding that it was scientifically "impossible" to get interest rates, unemployment, and inflation each under 10 percent. Of course, I was 10 years old.
In the bizarre climate of contemporary Washington, D.C., my 10-year-old self probably would be employed as an economic policy blogger by The Washington Post. But at the time I was merely sponging up the pessimistic malaise America was marinating in. Richard Nixon had tried his disastrous wage and price controls, Gerald Ford (our cover boy this month) wore his desperation on his jacket lapel in the form of a "WIN" (Whip Inflation Now!) button, and Jimmy Carter alternated between blaming the American people and openly wondering whether low inflation was even possible in the modern world.
It is one of the enduring curiosities of current economic discourse that inflation—which, along with crime, was consistently one of the two biggest American worries throughout the 1970s—has been almost erased from our collective memory banks. The best and brightest Keynesian economists who helped inflict it on the country have done their best to ignore the subject in subsequent decades, preferring to denounce a new series of totemic hate figures, from Ronald Reagan to George W. Bush. And the generation of liberal commentators who have never lived through a period of constantly rising prices are delivering snotty lectures to German central bankers (of all people) about being too "paranoid about inflation," lamenting that Reagan broke the perfectly workable nexus between inflation and expanded government, and trying to marginalize anti-inflation commentators as half-mad cranks. "I think the inflation rate should at least be above zero before we start worrying that it's gotten out of control," blogger Matthew Yglesias of the Obamaphile think tank the Center for American Progress wrote in June.
It turns out Yglesias' precondition was met that very month, when consumer prices jumped 1.1 percent for the 30-day period, putting 12-month inflation at 5 percent, the highest annual level in 17 years. As of press time, the Treasury Department had just bowed to the inflation concerns of foreign U.S. debt holders by dramatically increasing the sale of inflation protected U.S. bonds. "Inflation is the No. 1 worry," Marc Chandler, global head of currency strategy for Brown Brothers Harriman & Co., told The Wall Street Journal in early August.
As most of the participants in our "Inflation Returns!" forum (page 22) agree, the reappearance of inflation is not an if; it's a when. It is probably impossible to engineer what one of our panelists, San Jose State economist Jeffrey Rogers Hummel, has called in our pages "the most dramatic peacetime experiment in monetary and fiscal stimulus in U.S. history" without that money bomb being digested at some point. And the more those in or close to power still think in terms of if, the sooner when will come.
An analogy: By March 2003, the last time the United States faced a military outcome far worse than predicted was the Vietnam War. After 1975 the country was very tentative about engaging in major combat operations overseas. But then the first Gulf War succeeded much faster, and with far fewer U.S. casualties, than just about anyone predicted, and was then followed by similarly surprising (though less dramatic) successes in Kosovo and Afghanistan. By the time of the Iraq war, this string of better-than-advertised performances had lulled policy makers and voters alike into forgetting the lessons of the 1970s, becoming reckless with the exertion of power and failing utterly to concoct a plausible Plan B.
Living in Washington these days is like experiencing the 1970s all over again, just without the great music and bad clothes. Barack Obama is on the verge of unleashing the biggest wave of alternative energy boondoggles since Jimmy Carter. Commentators like Yglesias are proposing, as if it's never been tried, "What if we had a 95 percent marginal tax rate on income over $10 million? What dire consequences would flow from this?" And everywhere you see evidence of presumed (though highly questionable) short-term gain being offered in place of the longer-term reforms needed to convincingly reverse the worst economic crisis in at least a quarter century.
Instead of accepting the short-term pain of industrial bankruptcy, Obama (like his predecessor) keeps shoveling taxpayer money at failed companies. Instead of scaling back the government incentives that encourage Americans to take on more risky debt (see Tim Cavanaugh's "The Debtorship Society," page 62), the administration is expanding them. And in a move that looks like an attempt to illustrate Frédéric Bastiat's parable of the broken window, the federal government is not only bribing the middle class with $4,500 checks to destroy their perfectly functional old cars but claiming credit for rescuing the economy in the process.
Memory loss, while potentially ruinous to the U.S. economy, does have its momentary political advantages. Already we are seeing some of the most vociferous critics of George W. Bush's awful civil liberties record simply turn the other cheek at the sight of Obama extending more of the same (see Jacob Sullum's "The Right to a Guilty Verdict," page 9). "Things have been looking pretty good," New York Times columnist and former editorial page editor Gail Collins wrote in an assessment of Obama's first 200 days in office. "American influence is rising abroad, and at home nobody in the White House appears to be plotting to undermine our civil rights on a daily basis."
And in an act of short-term memory loss as predictable as it is despicable, partisans of both major political parties have completely swapped their views about public protest now that power in Washington has changed hands. The same Republicans who for years ridiculed every anti-Bush protest (including the mammoth, 100,000-strong anti-war march at the 2004 Republican National Convention) as a festival of America hating lunatics are now complaining bitterly about sparse and negative media coverage of comparatively tiny Tea Party protests from coast to coast. The Obama administration and its media allies, meanwhile, are portraying protests against health care reform and other economic policies as the shadowy works of a moneyed cabal staffed by the insane.
"Members of Congress are getting yelled at about socialized medicine by people who appear to have been sitting in their attics since the anti-tax tea parties, listening for signs of alien aircraft," Collins wrote in a column typical of the genre. "But on the bright side, they've finally got something to distract them from the president's birth certificate."
This effort at marginalization—of lumping everyone who opposes the president's complicated and expensive overhaul of the health care system with fringe conspiracy theorists—is something we should all get used to. As Jesse Walker demonstrates at length in his marvelous essay on "The Paranoid Center" (page 30), exaggerating the threat posed by fringe movements and then conflating them with workaday political opposition has long been a favorite method for the political center to exert and expand power, often at the direct expense of liberty and even life. It's the ugly instinct of overdogs everywhere. And it's a category of memory I wish I could forget.
Matt Welch (email@example.com) is editor in chief of reason.