JONATHAN CHAIT AUGUST 17, 2011
Jared Bernstein argues that Rick Perry's violent tight money views reflect a class-based view of inflation:
[W]hat’s really behind conservatives view on this issue is that the wealthy get hurt a lot more by inflation than by unemployment, and visa-versa for the middle class. ...
Why just last night, I was on the Kudlow show arguing against someone who wanted us back on a the gold standard (!!), the natural conclusion of sentiments like Gov Perry’s, and a fine way to cut the Fed off at the knees and ensure deflation at a time like this.
It's clearly true that the very differing affect of inflation on rich rentiers versus wage earners plays a huge role in the historic association between tight money views and right-wing politics. But Bernstein is overrating the role of ideology and underrating the role of partisanship. In 2001, when the economy faced a far milder downturn under a Republican president, Republicans crusaded for looser money.
If you want to grasp Perry's mentality, read his full statement and focus on the parts about politics:
“If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous, or treasonous, in my opinion.”
Perry is viewing this through a political lens. Monetary stimulus reduces unemployment and boosts President Obama's reelection prospects. I doubt Perry is consciously embracing an economic doctrine that he believes will harm the economy. But the partisan impulse is clearly driving his thinking.
Few people have well-defined views on issues like monetary policy. There's always some long-term cost associated with loose money. However tiny or remote the threat of inflation may be, it theoretically exists. When faced with the obvious reality that boosting growth will harm your party, it's very easy to persuade yourself that the long-term costs of inflation are actually large.
The GOP's embrace of loose money in 2001 is one way to test this hypothesis. Another would be to observe their behavior if they win the White House. I predict that, if they do, the party's brief infatuation with goldbuggery will fade away quickly.