Snowball Effect

I'm not saying anything about the 1970s here.


We have Steve Roth saying

Democrats’ remaining progressivism under Johnson — civil-rights legislation, Medicare and Medicaid, and the wholesale movement of liberated women into the workforce — eventually pushed a hot middle-out economy into the demand-driven inflation of the 70s. That torrid growth brought government debt down from 120% of GDP in 1947, to 35% in 1980.

The demand-driven inflation of the 70s? I think most people would say cost-driven inflation. Cost-of-oil driven.

And then we have the snowball effect that follows:

The obvious solution to the 70s inflation was to raise taxes, reducing government deficit spending, to drain off excess demand from a too-hot economy.

"A too-hot economy" in the 1970s? Roth's analysis is too quick and too careless.

Here's the full blizzard:

Democrats have been kicking the economic ball into their own net ever since. The obvious solution to the 70s inflation was to raise taxes, reducing government deficit spending, to drain off excess demand from a too-hot economy. Instead they acceded to the banker-industrial complex and the diktats of childish monetarism, again conceding the win to an economic belief system that is egregiously self-serving for the rich, and anathema to Democratic progressive economic populism.

See what happens when you jump too soon? Roth's "obvious solution" depends on his being right that the inflation was demand-pull and being right that the economy was too hot. Those things are at best uncertain. But Roth has already embedded his solution in a political and cultural argument.

People like that kind of argument. But it's not how economic problems get solved.